EXHIBIT 10(c)
EXECUTION COPY
WARRANT
TO PURCHASE COMMON STOCK OF
HANGER ORTHOPEDIC GROUP, INC.
Issuance Date: November 1, 1996
Number of Shares of Common Stock:
800,000 (subject to adjustment)
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS.................................................... 1
ARTICLE 2. EXERCISE OF WARRANT............................................ 5
2.1 Manner of Exercise........................................... 5
2.2 Exercise Price............................................... 6
2.3 Payment of Taxes............................................. 7
2.4 Fractional Shares............................................ 7
2.5 Continued Validity........................................... 7
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL
WARRANTS............................................ 7
3.1 Transfer .................................................... 7
3.2 Division and Combination..................................... 7
3.3 Expenses .................................................... 8
3.4 Maintenance of Books......................................... 8
ARTICLE 4. REDUCTION IN NUMBER OF ISSUABLE SHARES OF WARRANT
STOCK............................................................. 8
4.1 Share Reduction.............................................. 8
4.2 Pro Rata Effect.............................................. 8
4.3 New Warrants................................................. 8
ARTICLE 5. ADJUSTMENTS.................................................... 8
5.1 Stock Splits, Combinations, etc.............................. 8
5.2 Reclassification, Combinations, Mergers, etc................. 9
5.3 Issuance of Options or Convertible Securities................ 10
5.4 Dividends and Distributions.................................. 10
5.5 Self-Tenders................................................. 11
5.6 Issuance of Additional Shares of Common Stock................ 11
5.7 Certain Distributions........................................ 12
5.8 Consideration Received....................................... 12
5.9 Deferral or Exclusion of Certain Adjustments................. 12
5.10 Changes in Options and Convertible Securities............... 12
5.11 Expiration of Options and Convertible Securities............ 12
5.12 Other Adjustments........................................... 13
5.13 Other Action Affecting Common Stock......................... 13
ARTICLE 6. NOTICES TO WARRANT HOLDERS..................................... 13
6.1 Notice of Adjustments........................................ 13
6.2 Notice of Certain Corporate Action........................... 14
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ARTICLE 7. NO IMPAIRMENT.................................................. 14
ARTICLE 8. COMMON STOCK; RESERVATION AND AUTHORIZATION
OF REGISTRATION WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY........................................ 14
ARTICLE 9. TAKING OF RECORD; STOCK AND WARRANT
TRANSFER BOOKS....................... 15
ARTICLE 10. RESTRICTIONS ON TRANSFERABILITY............................... 15
10.1 Restrictive Legend.......................................... 15
10.2 Restriction on Transfers.................................... 16
10.3 Listing on Securities Exchange or NASDAQ.................... 16
ARTICLE 11. REGISTRATION RIGHTS........................................... 17
11.1 Incidental Registrations.................................... 17
11.2 Registration on Request..................................... 18
11.3 Registration Procedures..................................... 19
11.5 Rule 144.................................................... 25
11.6 Selection of Counsel........................................ 25
11.7 Holdback Agreement.......................................... 25
ARTICLE 12. LOSS OR MUTILATION............................................ 25
ARTICLE 13. OFFICE OF THE COMPANY......................................... 26
ARTICLE 14. FINANCIAL AND BUSINESS INFORMATION............................ 26
ARTICLE 15. LIMITATION OF LIABILITY....................................... 26
ARTICLE 16. MISCELLANEOUS................................................. 27
16.1 Nonwaiver and Expenses...................................... 27
16.2 Notice Generally............................................ 27
16.3 Successors and Assigns...................................... 27
16.4 Amendment................................................... 28
16.5 Severability................................................ 28
16.6 Headings.................................................... 28
16.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE............ 28
16.8 MUTUAL WAIVER OF JURY TRIAL................................. 28
EXHIBIT A SUBSCRIPTION FORM
EXHIBIT B ASSIGNMENT FORM
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NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH
THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE
SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER AND
THIS WARRANT.
WARRANT
TO PURCHASE 800,000 SHARES OF
COMMON STOCK (SUBJECT TO ADJUSTMENT) OF
HANGER ORTHOPEDIC GROUP, INC.
THIS IS TO CERTIFY THAT, for value received, PARIBAS PRINCIPAL INC.
(the "INITIAL HOLDER"), or its registered assigns, is the owner of eight
hundred thousand (800,000) Warrants (as hereinafter defined), which entitle
the Holder (as hereinafter defined), at any time prior to the Expiration Date
(as hereinafter defined), to purchase from HANGER ORTHOPEDIC GROUP, INC., a
Delaware corporation (the "COMPANY"), eight hundred thousand (800,000) shares
of Common Stock (as hereinafter defined and such number subject to adjustment
as provided herein), in whole or in part, including fractional parts, all on
the terms and conditions and pursuant to the provisions hereinafter set forth.
ARTICLE 1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued by the Company after the Issuance Date, other than the
Warrant Stock.
"AFFILIATE" shall mean, as to any Person, (i) any other Person
directly or indirectly controlling, controlled by, or under common
control with such Person or (ii) any director, officer or partner of such
Person or any Person specified in clause (i) above.
"AGGREGATE EXERCISE PRICE" shall mean, with respect to the exercise
of all or a portion of the Warrant, the Exercise Price multiplied by the
number of shares of Warrant Stock purchased upon such exercise.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of New York or the State of Maryland.
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"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"COMMON STOCK" shall mean the collective reference to the common
stock of the Company, par value $.01 per share, as constituted on the
Issuance Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof in
which the shares of Common Stock are converted into a new class of
capital stock and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 5.2) received by or
distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 5.2.
"CONVERTIBLE SECURITIES" shall have the meaning set forth in Section
5.3 hereof.
"CVCA" shall mean Chase Venture Capital Associates, L.P., a
California limited partnership.
"DEMAND PARTY" shall mean any other Holder or Holders that, either
individually or in aggregate with all other Holders with whom it is
acting together to demand registration, own(s) at least 50% of the total
number of Registrable Securities (whether in the form of Warrants or
Warrant Stock).
"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 from time
to time.
"EXERCISE PERIOD" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXERCISE PRICE" shall have the meaning set forth in Section 2.2
hereof.
"EXPIRATION DATE" shall mean the date which is the eighth
anniversary of the Issuance Date.
"FAIR VALUE" shall mean, with respect to the valuation of any
evidences of indebtedness, other securities, properties, assets, options,
warrants or subscription or purchase rights, the fair market value
thereof as determined in good faith by the Board of Directors of the
Company and, if required by the Majority Holders, supported by an opinion
from an investment banking firm acceptable to the Majority Holders, which
approval shall not be unreasonably withheld, of such Valuation
Properties; PROVIDED, HOWEVER that the Fair Value of any Notes tendered
in connection with any exercise of this Warrant pursuant to Section 2.1
shall be equal to the principal amount of such tendered Notes plus any
accrued and unpaid interest or other obligations owed in respect thereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"HOLDER" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose or the
Person holding any Warrant Stock, including, without limitation, in each
case, transferees thereof.
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"ISSUANCE DATE" shall mean November 1, 1996.
"MAJORITY HOLDERS" shall mean the Holders of Warrants exercisable
for in excess of 50% of the aggregate number of shares of Common Stock
then receivable upon exercise of all Warrants.
"MARKET PRICE" shall mean, as of any exercise date or other relevant
date, the average of the per share closing prices of a share of Common
Stock for the 10 consecutive Trading Days immediately preceding such date
on the principal national securities exchange in the United States on
which the shares of Common Stock are listed or admitted to trading, or if
not listed or admitted to trading on any national securities exchange on
such Trading Day, on the National Association of Securities Dealers
Automated Quotations National Market System, or if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange or quoted on such National Market System on such Trading Day,
the average of the closing bid and asked prices of a share of Common
Stock in the over-the-counter market on such Trading Day as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company. If the Common Stock is not quoted or listed by any such
organization, exchange or market, the Market Price of the Common Stock as
of such exercise or other relevant date shall be determined in good faith
by the Board of Directors of the Company.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor entity thereto.
"NASDAQ" shall mean the National Association of Securities Dealers
Automatic Quotation System.
"NOTES" the 8.00% Senior Subordinated Notes issued pursuant to the
Note Purchase Agreement.
"NOTE PURCHASE AGREEMENT" shall mean the Senior Subordinated Note
Purchase Agreement, dated as of November 1, 1996, among the Company, CVCA
and Paribas.
"OPTIONS" shall have the meaning set forth in Section 5.3 hereof.
"OUTSTANDING" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"PARIBAS" shall mean Paribas Principal, Inc.
"PERMITTED ISSUANCES" shall mean the issuance of shares of Common
Stock upon exercise of rights to acquire shares of Common Stock
exercisable pursuant to options held by employees or directors under
stock option plans which may from time to time be adopted by the Company
after the Issuance Date.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation,
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entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"REGISTRABLE SECURITIES" shall mean (i) the Warrants and (ii) the
Warrant Stock. As to any particular Registrable Securities, once issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale by the Holder of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such
registration statement, (ii) such securities shall have been distributed
to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration
or qualification of such securities under the Securities Act or any state
securities or blue sky law then in force, or (iv) such securities shall
have ceased to be Outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with Article 11 of this Agreement,
including, without limitation, (i) all Commission and stock exchange or
NASD registration and filing fees (including, if applicable, the fees and
expenses of any "qualified independent underwriter," as such term is
defined in Schedule E to the By-laws of the NASD, and of its counsel),
(ii) all fees and expenses of complying with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) all fees and
expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange pursuant to clause (viii) of
Section 11.3 and all rating agency fees, (v) the fees and disbursements
of counsel for the Company and of its independent public accountants,
including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, (vi)
the reasonable fees and disbursements of counsel selected pursuant to
Section 11.6 hereof by the Holders of the Registrable Securities being
registered to represent such Holders in connection with each such
registration, (vii) any fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities, including
liability insurance if the Company so desires or if the underwriters so
require, and the reasonable fees and expenses of any special experts
retained in connection with the requested registration, but excluding
underwriting discounts and commissions and certain transfer taxes, if
any, and (viii) other reasonable out-of-pocket expenses of Holders
(PROVIDED that such expenses shall not include expenses of counsel other
than those provided for in clause (vi) above).
"RESPONSIBLE OFFICER" shall mean the chief executive officer of the
Company, the president of the Company or the chief financial officer of
the Company.
"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.
"SUBSIDIARY" shall mean any corporation of which an aggregate of
more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned of record or beneficially by the Company and/or one or
more other Subsidiaries of the Company.
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"TENDER OFFER" shall mean any public offer to substantially all
holders of Common Stock to purchase at least 50% of the Common Stock at
the time outstanding.
"TRADING DAY" shall mean each weekday other than any day on which
any Common Stock is not traded on any national securities exchange, on
NASDAQ or in the over-the-counter market.
"TRANSFER" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
or transfer of a beneficial interest thereof within the meaning of the
Securities Act (excluding any transfer to an Affiliate of the Initial
Holder).
"WARRANT STOCK" shall mean all shares of Common Stock issued or
issuable upon the exercise hereof, including any such shares of Common
Stock transferred to any transferee of such Holder.
"WARRANTS" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, this
Warrant. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of shares of Common Stock
for which they may be exercised.
ARTICLE 2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE. At any time and from time to time from and
after the Issuance Date and until 5:00 P.M., New York time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any
part of the number of shares of the Common Stock issuable hereunder; PROVIDED
that Holder may not exercise this Warrant if after giving effect to such
exercise the total number of shares of Common Stock issued upon exercise
hereof would exceed the product of:
(i) (a) 0.45, if such date of exercise is on or prior to November 1,
1997; or
(b) 0.50, if such date of exercise is on or prior to May 1, 1998
but after November 1, 1997; or
(c) 1.00, if such date is after May 1, 1998; times
(ii) the total number of shares of Common Stock issuable upon
exercise hereof as of the Issuance Date (as such number of
shares shall have been adjusted pursuant to Article 5
immediately prior to such exercise).
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 0000 Xxx Xxxxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxxx 00000 or at the office or agency designated by the Company
pursuant to Article 13, (i) a written notice of Xxxxxx's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to which the exercise shall relate and (ii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of
this Warrant as Exhibit A (the "SUBSCRIPTION FORM"), duly executed by Holder
or its agent or attorney.
Upon receipt by the Company of (a) this Warrant and (b) the
Subscription Form with the applicable box checked thereon, the Company shall
issue the number of shares of Common Stock set forth in the next paragraph.
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To the extent Holder has checked the box on the Subscription Form
contemplating payment of either (x) the Aggregate Exercise Price in cash or
(y) pursuant to the surrender by Holder of Notes having a Fair Value equal to
the Aggregate Exercise Price in connection with an exercise hereof, then upon
payment, by certified or official bank check payable to the order of the
Company or by wire transfer of immediately available funds to an account
designated by the Company, of the Aggregate Exercise Price for the shares of
Warrant Stock to be purchased pursuant to the exercise of the Warrant, the
Company shall, as promptly as practicable, and in any event within two (2)
Business Days thereafter, execute or cause to be executed and deliver or cause
to be delivered to Holder a certificate or certificates representing the
aggregate number of shares of Common Stock issuable upon such exercise. To the
extent Holder has checked the box on the Subscription Form by which Holder
elects not to pay the Aggregate Exercise Price in cash and instead to make
such payment by way of Warrant surrender, the Company shall, as promptly as
practicable, and in any event within two (2) Business Days thereafter, (i)
execute or cause to be executed and deliver or cause to be delivered to Holder
a certificate or certificates representing the aggregate number of shares of
Common Stock to be issued to Holder upon such "cashless" exercise and (ii)
cancel the number of shares of Warrant Stock issuable upon exercise of this
Warrant having an aggregate value (based on the Market Price at the time of
exercise minus the Exercise Price) equal to the Aggregate Exercise Price for
the number of shares described in clause (i) above.
In either case, the stock certificate or certificates so delivered
shall be in such denomination or denominations as such Holder shall request in
the Subscription Form and shall be registered in the name of Holder or,
subject to Article 10, such other name as shall be designated in the
Subscription Form.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder or
any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice is received by the Company.
If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
the Warrant Stock issued upon such exercise, deliver to Holder a new Warrant
evidencing the right of Holder to receive the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such exercise less
the number of shares issued pursuant to such exercise of this Warrant and/or,
where applicable, less the number of shares surrendered in non-cash payment in
connection with such exercise, which new Warrant shall in all respects (other
than number of shares) be identical to this Warrant.
2.2 EXERCISE PRICE. Subject to adjustment as hereinafter set forth,
the price payable upon exercise hereof (the "Exercise Price"), with respect to
each share of Common Stock, shall be:
(a) with respect to 335,150 shares of Common Stock (the "SECTION
2.2(A) WARRANT STOCK") issuable upon exercise hereof, $6.375; and
(b) with respect to 464,850 shares of Common Stock (the "SECTION
2.2(B) WARRANT STOCK") issuable upon exercise hereof, $4.00865.
2.3 PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable
and shall have been issued free from any preemptive or similar right and shall
be free and clear of any lien, claim or similar charge or restriction. The
Company shall pay all expenses in connection with, and all documentary, stamp
or similar issue or transfer taxes, if any, and all other taxes and other
governmental charges that may be
505298\0057\02050\96AXKNAK.WAR
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imposed with respect to, the issue and delivery of this Warrant, and all
shares of capital stock and other securities or property issuable or
deliverable upon the exercise of this Warrant, and shall indemnify and hold
any Holder, its directors, agents, general and limited partners and Affiliates
from any taxes, interest and penalties which may become payable by any of such
Persons as a result of the failure or delay by the Company to pay such taxes
or charges. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Common Stock issuable upon exercise of this
Warrant in any name other than that of Holder and its Affiliates.
2.4 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of Warrants. If any fraction
of a share of Common Stock would be issuable on the exercise of any Warrant
(or specified portion thereof), the Company shall pay to the Holder of the
Warrant an amount in cash equal to such fraction multiplied by the
then-current Market Price per share of Common Stock. For the purposes of this
Section 2.3, the date from which the Market Price of Common Stock shall be
computed shall be the date on which notice is received by the Company pursuant
to Section 2.1.
2.5 CONTINUED VALIDITY. A Holder of shares of Warrant Stock shall
continue to be entitled with respect to such shares to all rights and subject
to all obligations to which it would have been entitled or subject as Holder
of this Warrant under Articles 10, 11, 14 and 16 of this Warrant.
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL WARRANTS
3.1 TRANSFER. Subject to compliance with Article 10, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to
in Section 2.1 or the office or agency designated by the Company pursuant to
Article 13, together with a written assignment of this Warrant substantially
in the form of Exhibit B hereto duly executed by Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable pursuant to
Section 2.3 upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall, subject to Article 10, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Article 10, may be exercised by a new
Holder for the receipt of shares of Common Stock without having a new Warrant
issued. If requested by the Company, a new Holder shall acknowledge in
writing, in form reasonably satisfactory to the Company, such Xxxxxx's
continuing obligations under Articles 10 and 16.
3.2 DIVISION AND COMBINATION. Subject to Article 10, this Warrant
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Xxxxxx or its agent or attorney. Subject to compliance with Section
3.1 and with Article 10, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or combined
in accordance with such notice.
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3.3 EXPENSES. The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes not payable by the Company pursuant to
Section 2.3) the new Warrant or Warrants under this Article 3.
3.4 MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration or transfer of the
Warrants.
ARTICLE 4. REDUCTION IN NUMBER OF ISSUABLE SHARES OF WARRANT STOCK
4.1 SHARE REDUCTION. If, prior to May 1, 1998, the Company shall
have repaid in full all amounts borrowed pursuant to the Note Purchase
Agreement on or prior to the dates set forth in clause (i) below, then the
number of shares of Common Stock issuable upon exercise of this Warrant as of
the close of business on the date of such repayment shall be reduced (but not
below zero) by that number of shares which is equal to the product of: (i)
0.55, if such date of repayment is on or prior to November 1, 1997, or 0.50,
if such date of repayment is on or prior to May 1, 1998 but after November 1,
1997; and (ii) the total number of shares of Common Stock issuable upon
exercise hereof as of the Issuance Date (as such number of shares shall have
been adjusted pursuant to Article 5 prior to such close of business).
4.2 PRO RATA EFFECT. Any reduction in shares pursuant to Section 4.1
shall be applied to reduce the number of shares of Section 2.2(a) Warrant
Stock and Section 2.2(b) Warrant Stock then issuable, pro rata, based on the
relative number of shares in each such category then issuable (but not then
issued) upon exercise of this Warrant. No reduction in shares pursuant to
Section 4.2 shall have any effect on any Section 2.2(a) Warrant Stock and/or
Section 2.2(b) Warrant Stock issued prior to such reduction.
4.3 NEW WARRANTS. Upon any reduction pursuant to this Article 4, the
Company (at its own expense and subject to Section 2.3) will deliver to Holder
a new Warrant evidencing the rights of Holder to receive the number of shares
of Common Stock upon exercise of this Warrant less the number of shares to
which such reduction relates, which new Warrant shall in all respects (other
than number of shares) be identical to this Warrant.
ARTICLE 5. ADJUSTMENTS
The Exercise Price and the number of shares of Common Stock for
which this Warrant is exercisable shall be subject to adjustment from time to
time as set forth in this Article 5. The Company shall give each Holder notice
of any event described below which requires an adjustment pursuant to this
Article 5 at the time of such event. At any time and from time to time, the
Company shall promptly, without any action required of the Holders, cause the
appropriate adjustment or adjustments (to the extent that more than one event
requiring an adjustment has occurred since the last adjustment made) to be
made pursuant to this Article 5 in respect of each Warrant outstanding.
5.1 STOCK SPLITS, COMBINATIONS, ETC.. In case the Company shall
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Additional Common Stock or of
capital stock of any other class), (B) subdivide its outstanding shares of
Common Stock or (C) combine its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to
such action shall be adjusted so that the Holder of any Warrant thereafter
exercised shall be entitled to receive the number of shares of Capital Stock
of the Company which such Xxxxxx would have owned immediately following such
action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this
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paragraph shall become effective immediately after the record date in the case
of a dividend and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification. If, as a result
of an adjustment made pursuant to this paragraph, the Holder of any Warrant
thereafter exercised shall become entitled to receive shares of two or more
classes of Capital Stock of the Company, the Board of Directors of the Company
shall in good faith determine the allocation of the adjusted Exercise Price
between or among shares of such classes of Capital Stock.
5.2 RECLASSIFICATION, COMBINATIONS, MERGERS, ETC.. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in Section 5.1 above and
other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
in case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other Capital Stock issuable upon
exercise of the Warrants (other than a change in par value, or from par value
to no par value, or from no par value to par value or as a result of a
subdivision or combination)) or in case of any sale or conveyance to another
corporation of all or substantially all of the assets of the Company, then, as
a condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company or such a successor or purchasing corporation, as the
case may be, shall forthwith make lawful and adequate provision whereby the
Holder of such Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock issuable upon exercise of such Warrant immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance and
enter into a supplemental warrant agreement so providing. Such provisions
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 5. If the
issuer of securities deliverable upon exercise of Warrants under the
supplemental warrant agreement is an Affiliate of the formed, surviving or
transferee corporation, that issuer shall join in the supplemental warrant
agreement. The above provisions of this Section 5.2 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant Agreement to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of the Common Stock
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Article 5. For purposes of
this Section 5.2 "shares of stock and other securities" of a successor or
acquiring corporation shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 5.2 shall similarly
apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
5.3 ISSUANCE OF OPTIONS OR CONVERTIBLE SECURITIES In the event the
Company shall, at any time or from time to time after the date hereof, issue,
sell, distribute or otherwise grant in any
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manner (including by assumption) to all holders of the Common Stock any rights
to subscribe for or to purchase, or any warrants or options for the purchase
of, Common Stock or any stock or securities convertible into or exchangeable
for Common Stock (any such rights, warrants or options being herein called
"OPTIONS" and any such convertible or exchangeable stock or securities being
herein called "CONVERTIBLE SECURITIES") or any Convertible Securities (other
than upon exercise of any Option), whether or not such Options or the rights
to convert or exchange such Convertible Securities are immediately
exercisable, and the price per share at which Common Stock is issuable upon
the exercise of such Options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (i) the aggregate amount, if
any, received or receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Options or any such Convertible
Security, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Options or upon
conversion or exchange of all such Convertible Securities, plus, in the case
of Options to acquire Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the conversion or exchange of
all such Convertible Securities, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities or upon the
conversion or exchange of all Convertible Securities issuable upon the
exercise of all such Options) shall be less than the Market Price per share of
Common Stock on the record date for the issuance, sale, distribution or
granting of such Options (any such event being herein called a "DISTRIBUTION")
then, effective upon such Distribution, the Exercise Price shall be reduced to
the price (calculated to the nearest 1/1,000 of one cent) determined by
multiplying the Exercise Price in effect immediately prior to such
Distribution by a fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding (exclusive of any treasury
shares) immediately prior to such Distribution multiplied by the Market Price
per share of Common Stock on the date of such Distribution plus (ii) the
consideration, if any, received by the Company upon such Distribution, and the
denominator of which shall be the product of (A) the total number of shares of
Common Stock outstanding (exclusive of any treasury shares) immediately after
such Distribution multiplied by (B) the Market Price per share of Common Stock
on the record date for such Distribution. For purposes of the foregoing, the
total maximum number of shares of Common Stock issuable upon exercise of all
such Options or upon conversion or exchange of all such Convertible Securities
or upon the conversion or exchange of the total maximum amount of the
Convertible Securities issuable upon the exercise of all such Options shall be
deemed to have been issued as of the date of such Distribution and thereafter
shall be deemed to be outstanding and the Company shall be deemed to have
received as consideration therefor such price per share, determined as
provided above. Except as provided in Sections 5.9 and 5.10 below, no
additional adjustment of the Exercise Price shall be made upon the actual
exercise of such Options or upon conversion or exchange of the Convertible
Securities or upon the conversion or exchange of the Convertible Securities
issuable upon the exercise of such Options.
5.4 DIVIDENDS AND DISTRIBUTIONS. In the event the Company shall, at
any time or from time to time after the date hereof, distribute to all the
holders of Common Stock any dividend or other distribution of cash, evidences
of its indebtedness, other securities or other properties or assets (in each
case other than (i) dividends payable in Additional Common Stock, Options or
Convertible Securities and (ii) any cash dividend from current or retained
earnings), or any options, warrants or other rights to subscribe for or
purchase any of the foregoing, then (A) the Exercise Price shall be decreased
to a price determined by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the Market Price per share of Common
Stock on the record date for such distribution less the sum of (X) the cash
portion, if any, of such distribution per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such distribution
plus (Y) the then fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock outstanding (exclusive
of any treasury shares) on the record date for such distribution of that
portion, if any, of such distribution consisting of evidences of indebtedness,
other securities, properties,
505298\0057\02050\96AXKNAK.WAR
11
assets, options, warrants or subscription or purchase rights, and the
denominator of which shall be such Market Price per share of Common Stock and
(B) the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock so purchasable immediately prior to the record date for
such distribution by a fraction, the numerator of which shall be the Exercise
Price in effect immediately prior to the adjustment required by clause (A) of
this sentence and the denominator of which shall be the Exercise Price in
effect immediately after such adjustment. The adjustments required by this
Section 5.4 shall be made whenever any such distribution occurs retroactive to
the record date for the determination of stockholders entitled to receive such
distribution.
5.5 SELF-TENDERS. In case of the consummation of a tender or
exchange offer (other than an odd-lot tender offer) made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock to the
extent that the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the first reported sales price per
share of Common Stock on the trading day next succeeding the Expiration Time,
the Exercise Price shall be reduced so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to
the Expiration Time by a fraction the numerator of which shall be the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the first reported sales price of
the Common Stock on the trading day next succeeding the Expiration Time, and
the denominator shall be the sum of (A) the fair market value (determined by
the Board of Directors of the Company, whose determination shall be conclusive
and described in a resolution of the Board of Directors) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"PURCHASED SHARES") and (B) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on the Expiration Time and the
first reported sales price of the Common Stock on the trading day next
succeeding the Expiration Time, such reduction to become effective immediately
prior to the opening of business on the day following the Expiration Time.
5.6 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If at any time
the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock for consideration in an amount per
Additional Share of Common Stock less than the Market Price, then the number
of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product obtained by multiplying the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale by a fraction (A) the numerator of which shall be the number of
shares of Common Stock outstanding immediately after such issue or sale, and
(B) the denominator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, and (2) the
aggregate consideration received from the issuance or sale of the Additional
Shares of Common Stock divided by the Market Price. For the purposes of this
Section 5.6, the date as of which the Market Price per share of Common Stock
shall be computed shall be the earlier of (a) the date on which the Company
shall enter into a firm contract for the issuance of such Additional Shares of
Common Stock or (b) the date of actual issuance of such Additional Shares of
Common Stock. Notwithstanding the foregoing, no adjustment shall be made under
this Section for issuances of Additional Shares of Common Stock (i) with
respect to Permitted Issuances or (ii) upon exercise of the Warrants.
5.7 CERTAIN DISTRIBUTIONS. If the Company shall pay a dividend or
make any other distribution payable in Options or Convertible Securities,
then, for purposes of Section 5.3 above, such Options or Convertible
Securities shall be deemed to have been issued or sold without consideration.
505298\0057\02050\96AXKNAK.WAR
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5.8 CONSIDERATION RECEIVED. If any shares of Common Stock, Options
or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board
of Directors of the Company). If any Options shall be issued in connection
with the issuance and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration; PROVIDED, HOWEVER, that if such
Options have an exercise price equal to or greater than the Market Price of
the Common Stock on the date of issuance of such Options, then such Options
shall be deemed to have been issued for consideration equal to such exercise
price.
5.9 DEFERRAL OR EXCLUSION OF CERTAIN ADJUSTMENTS. No adjustment to
the Exercise Price (including the related adjustment to the number of shares
of Common Stock purchasable upon the exercise of each Warrant) shall be
required hereunder unless such adjustment, together with other adjustments
carried forward as provided below, would result in an increase or decrease of
at least one percent (1%) of the Exercise Price; PROVIDED that any adjustments
which by reason of this Section 5.9 are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. No
adjustment need be made for a change in the par value of the Common Stock. All
calculations under this Article shall be made to the nearest 1/1,000 of one
cent or to the nearest 1/1000th of a share, as the case may be. No adjustment
to the Exercise Price shall be made at any time hereunder in connection with
the issuance by the Company of a warrant to purchase 35,000 shares of Common
Stock at an exercise price of $2.44 pursuant to the warrant agreement, dated
as of November 1, 1996, among Hanger Orthopedic Group, Inc., X.X. Xxxxxx, Inc.
of Georgia and Xxxx X. Xxxxxxxxxx.
5.10 CHANGES IN OPTIONS AND CONVERTIBLE SECURITIES. If the exercise
price provided for in any Options referred to in Section 5.3 above, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 5.3 above, or the rate at
which any Convertible Securities referred to in Section 5.3 above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Article 5), the Exercise Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock
so purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
5.11 EXPIRATION OF OPTIONS AND CONVERTIBLE SECURITIES. If, at any
time after any adjustment to the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall have been made pursuant to Sections
5.3 or 5.10 above or this Section 5.11, any Options or Convertible Securities
shall have expired unexercised, the number of such shares so purchasable
shall, upon such expiration, be readjusted and shall thereafter be such as
they would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares of
Common Stock deemed to have been issued in connection with such Options or
Convertible Securities were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or Convertible Securities and
(ii) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale, distribution or
505298\0057\02050\96AXKNAK.WAR
13
granting of all such Options or Convertible Securities, whether or not
exercised; PROVIDED that no such readjustment shall have the effect of
decreasing the number of such shares so purchasable by an amount (calculated
by adjusting such decrease to account for all other adjustments made pursuant
to this Article 5 following the date of the original adjustment referred to
above) in excess of the amount of the adjustment initially made in respect of
the issuance, sale, distribution or granting of such Options or Convertible
Securities.
5.12 OTHER ADJUSTMENTS. In the event that at any time, as a result
of an adjustment made pursuant to this Article 5, the Holders shall become
entitled to receive any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so receivable upon
exercise of the Warrants and the Exercise Price applicable to such exercise
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares
of Common Stock contained in this Article 5.
5.13 OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Article 5, then the number of
shares of Common Stock or other stock for which this Warrant is exercisable
shall be adjusted in such manner as may be equitable in the circumstances. If
the Company shall at any time and from time to time issue or sell (i) any
shares of any class of common stock other than Common Stock, (ii) any
evidences of its indebtedness, shares of stock or other securities which are
convertible into or exchangeable for such shares of common stock, with or
without the payment of additional consideration in cash or property or (iii)
any warrants or other rights to subscribe for or purchase any such shares of
common stock or any such evidences, shares of stock or other securities, then
in each such case such issuance shall be deemed to be of, or in respect of,
Common Stock for purposes of this Article 5; PROVIDED, HOWEVER, that, without
limiting the generality of the foregoing, if the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of, common stock other
than Common Stock, including shares of non-voting common stock, then the
number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the aggregate number of shares of such common stock and of Common Stock which
a record holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event would
own or be entitled to receive after the happening of such event.
ARTICLE 6. NOTICES TO WARRANT HOLDERS
6.1 NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, and the Exercise Price payable
therefor, shall be adjusted pursuant to Article 5, the Company shall forthwith
prepare a certificate to be executed by a member of the Board of Directors or
one of its executive officers, setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of
Directors of the Company determined the fair market value of any evidences of
indebtedness. other securities, properties, assets, options, warrants or
subscription or purchase rights), specifying the number of shares of Common
Stock for which this Warrant is exercisable and (if such adjustment was made
pursuant to Section 5.2, 5.12 or 5.13) describing the number and kind of any
other shares of stock or property for which this Warrant is exercisable. In
the event that the Majority Holders shall challenge any of the calculations
set forth in such certificate within 20 days after the Company's notification
thereof, the Company shall retain a firm of independent certified public
accountants of national standing selected by the Company and reasonably
acceptable to the Majority Holders, to prepare and execute a certificate
verifying the
505298\0057\02050\96AXKNAK.WAR
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method by which the adjustment was calculated, the number of shares of Common
Stock for which this Warrant is exercisable and (if such adjustment was made
pursuant to Section 5.2, 5.12 or 5.13) describing the number and kind of any
other shares of stock or property for which this Warrant is exercisable. The
Company shall promptly cause a signed copy of any certificate prepared
pursuant to this Section 6.1 to be delivered to each Holder in accordance with
Section 16.2. The Company shall keep at its office or agency designated
pursuant to Article 13 copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
6.2 NOTICE OF CERTAIN CORPORATE ACTION. The Holder of any Warrant
shall be entitled to the same rights to receive notice of corporate action as
any holder of Common Stock.
ARTICLE 7. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Xxxxxx, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
ARTICLE 8. COMMON STOCK; RESERVATION AND AUTHORIZATION OF
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY
From and after the Issuance Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise
of any Warrant in accordance with the terms of such Warrant, shall be validly
issued, fully paid and nonassessable and shall have been issued free from any
preemptive or similar right and shall be free and clear of any lien, claim or
similar charge or restriction.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable, the
Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
505298\0057\02050\96AXKNAK.WAR
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If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Article 11) before such shares may be so issued, the Company will
in good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered.
ARTICLE 9. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company
to the holders of its Common Stock with respect to which any provision of
Article 5 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time close its
stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of any Warrant.
ARTICLE 10. RESTRICTIONS ON TRANSFERABILITY
10.1 RESTRICTIVE LEGEND. (a) Except as otherwise provided in this
Article 10, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
transferee of any such certificate, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND ARE SUBJECT TO CERTAIN PROVISIONS SPECIFIED IN A CERTAIN WARRANT
DATED NOVEMBER 1, 1996, ORIGINALLY ISSUED BY HANGER ORTHOPEDIC GROUP,
INC. (THE "WARRANT"), AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR
ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS THEREUNDER AND THE WARRANT. A COPY OF THE
FORM OF SAID WARRANT IS ON FILE WITH THE SECRETARY OF HANGER ORTHOPEDIC
GROUP, INC. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT."
(b) Except as otherwise provided in this Article 10, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED
WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED
BY THE PROVISIONS OF, THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES
AND REGULATIONS THEREUNDER AND THIS WARRANT."
505298\0057\02050\96AXKNAK.WAR
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10.2 RESTRICTION ON TRANSFERS. (a) Subject to Section 10.2(b) below,
prior to any Transfer of any Warrants or any shares of Warrant Stock (other
than a Transfer by a Holder to the Company), the Holder of such Warrants or
Warrant Stock shall deliver notice of such Transfer to the Company. Upon the
Company's receipt of such notice, such Holder shall be entitled to Transfer
such Warrants or such Warrant Stock in compliance with the Securities Act.
Each certificate, if any, evidencing such shares of Warrant Stock issued upon
such Transfer shall bear the restrictive legend set forth in Section 10.1(a),
and each Warrant issued upon such Transfer shall bear the restrictive legend
set forth in Section 10.1(b), unless such legend is not required in order to
ensure compliance with the Securities Act.
(b) Notwithstanding any other provision of this Warrant, the
restrictions imposed by this Article 10 upon transferability of the Warrants
and the Warrant Stock and the legend requirements of Section 10.1, shall
terminate as to any particular Warrant or share of Warrant Stock when and so
long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto. Whenever the restrictions
imposed by this Article 10 shall terminate as to this Warrant, as hereinabove
provided, the Holder hereof shall be entitled to receive from the Company, at
the expense of the Company, a new Warrant bearing the following legend in
place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THIS WARRANT CONTAINED IN
ARTICLE 10 HEREOF TERMINATED ON ____________, ____, AND ARE OF NO FURTHER
FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions
imposed by this Article 10 shall terminate as to any share of Warrant Stock,
as hereinabove provided, the Holder thereof shall be entitled to receive from
the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 10.1(a).
(c) Notwithstanding anything in this Warrant to the contrary, in the
event of a Tender Offer, the restrictive legends referred to in Sections
9.1(a) and 9.1(b) may be omitted from any Warrants or Warrant Stock sold by a
Holder to the maker of the Tender Offer.
10.3 LISTING ON SECURITIES EXCHANGE OR NASDAQ. If the Company shall
list any shares of Common Stock on any securities exchange or on NASDAQ, it
will, at its expense, list thereon, maintain and, when necessary, increase
such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange or NASDAQ rules, issuable
upon the exercise of this Warrant so long as any shares of Common Stock shall
be so listed during any such Exercise Period.
10.4 COVENANT REGARDING CONSENTS. The Company hereby covenants to
use its best efforts upon request of one or more Holders to seek any waivers
or consents, or to take any other action required, to effectuate the exercise
of this Warrant by any Holder.
ARTICLE 11. REGISTRATION RIGHTS
11.1 INCIDENTAL REGISTRATIONS. (a) RIGHT TO INCLUDE REGISTRABLE
SECURITIES. If the Company at any time after the date hereof proposes to
register its Common Stock (or any security which is convertible into or
exchangeable or exercisable for Common Stock) under the Securities Act
505298\0057\02050\96AXKNAK.WAR
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(other than a registration on Form S-4 or S-8, or any successor or other forms
promulgated for similar purposes), whether or not for sale for its own
account, in a manner which would permit registration of Registrable Securities
for sale to the public under the Securities Act, it will, at each such time,
give prompt written notice to all Holders of Registrable Securities of its
intention to do so and of such Holders' rights under this Section 11.1. Upon
the written request of any such Holder made within 15 days after the receipt
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such Holder), the Company will use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holders
thereof, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered; PROVIDED that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to proceed with
the proposed registration of the securities to be sold by it, the Company may,
at its election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten offering,
all Holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in
combined primary and secondary offerings. If a registration requested pursuant
to this Section 11.1(a) involves an underwritten public offering, any Holder
of Registrable Securities requesting to be included in such registration may
elect, in writing prior to the effective date of the registration statement
filed in connection with such registration, not to register such securities in
connection with such registration. Nothing in this Section 11.1 shall operate
to limit the right of Holder to (i) request the registration of Warrant Stock
issuable upon exercise of Warrants held by such Holder notwithstanding the
fact that at the time of request, such Holder holds only Warrants or (ii)
request the registration at one time of both Warrants and Warrant Stock.
(b) EXPENSES. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 11.1.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant
to this Section 11.1 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, so as to be likely to have an adverse
effect on the price, timing or distribution of the Securities offered in such
offering as contemplated by the Company (other than the Registrable
Securities), then the Company will include in such registration (i) first,
100% of the securities the Company proposes to sell and (ii) second, to the
extent of the number of Registrable Securities requested to be included in
such registration which, in the opinion of such managing underwriter, can be
sold without having the adverse effect referred to above, the number of
Registrable Securities which the Holders have requested to be included in such
registration, such amount to be allocated pro rata among all requesting
Holders on the basis of the relative number of shares of Registrable
Securities then held by each such Holder (provided that any shares thereby
allocated to any such Holder that exceed such Xxxxxx's request will be
reallocated among the remaining requesting Holders in like manner).
11.2 REGISTRATION ON REQUEST. (a) REQUEST BY THE DEMAND PARTY. At
any time, upon the written request of the Demand Party requesting that the
Company effect the registration under the Securities Act of all or part of
such Demand Party's Registrable Securities and specifying the amount and
intended method of disposition thereof, the Company will promptly give written
notice of such
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requested registration to all other Holders of such Registrable Securities,
and thereupon will, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act of:
(i) such Registrable Securities which the Company has been so
requested to register by the Demand Party; and
(ii) all other Registrable Securities as are to be registered at the
request of a Demand Party and which the Company has been requested to
register by any other Holder thereof by written request given to the
Company within 15 days after the giving of such written notice by the
Company (which request shall specify the amount and intended method of
disposition of such Registrable Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities so to be
registered; PROVIDED, that, unless Holders of a majority of the Registrable
Securities held by Holders consent thereto in writing, the Company shall not
be obligated to file a registration statement relating to any registration
request under this Section 11.2(a) (x) within a period of nine months after
the effective date of any other registration statement relating to any
registration request under this Section 11.2(a) which was not effected on Form
S-3 (or any successor or similar short-form registration statement) or
relating to any registration effected under Section 11.1, or (y) if with
respect thereto the managing underwriter, the Commission, the Securities Act
or the rules and regulations thereunder, or the form on which the registration
statement is to be filed, would require the conduct of an audit other than the
regular audit conducted by the Company at the end of its fiscal year, in which
case the filing may be delayed until the completion of such regular audit
(unless the Holders of the Registrable Securities to be registered agree to
pay the expenses of the Company in connection with such an audit other than
the regular audit). Nothing in this Section 11.2 shall operate to limit the
right of Holder to (i) request the registration of Warrant Stock issuable upon
exercise of Warrants held by such Holder notwithstanding the fact that at the
time of request, such Holder holds only Warrants or (ii) request the
registration at one time of both Warrants and Warrant Stock.
(b) REGISTRATION STATEMENT FORM. If any registration requested
pursuant to this Section 11.2 which is proposed by the Company to be effected
by the filing of a registration statement on Form S-3 (or any successor or
similar short-form registration statement) shall be in connection with an
underwritten public offering, and if the managing underwriter shall advise the
Company in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other
form.
(c) EXPENSES. The Company will pay all Registration Expenses in
connection with the first two (2) registrations of each class or series of
Registrable Securities pursuant to this Section 11.2 upon the written request
of any of the Holders; PROVIDED that the Company will pay Registration
Expenses in connection with an additional two (2) such registrations if the
Company shall have not repaid in full all amounts borrowed pursuant to the
Note Purchase Agreement on or prior to May 1, 1998; PROVIDED, FURTHER that any
requested registration by Holder of both Warrants and Warrant Stock at one
time shall only count as one registration. All expenses for any subsequent
registrations of Registrable Securities pursuant to this Section 11.2 shall be
paid pro rata by the Company and all other Persons (including the Holders)
participating in such registration on the basis of the relative number of
Warrants or shares of Warrant Stock, as the case may be, of each such person
whose Registrable Securities are included in such registration.
(d) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 11.2 will not be deemed to have been effected unless
it has become effective and all of the Registrable
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Securities registered thereunder have been sold; PROVIDED that if, within 180
days after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency
or court, such registration will be deemed not to have been effected.
(e) SELECTION OF UNDERWRITERS. If a requested registration pursuant
to this Section 11.2 involves an underwritten offering, the Holders of a
majority of the Registrable Securities which are held by Holders and which the
Company has been requested to register shall have the right to select the
investment banker or bankers and managers to administer the offering;
PROVIDED, HOWEVER, that such investment banker or bankers and managers shall
be reasonably satisfactory to the Company.
(f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 11.2 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion, the
number of securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities) exceeds the
number which can be sold in such offering, the Company will include in such
registration only the Registrable Securities requested to be included in such
registration. In the event that the number of Registrable Securities requested
to be included in such registration exceeds the number which, in the opinion
of such managing underwriter, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata
among all requesting Holders on the basis of the relative number of
Registrable Securities then held by each such Holder (provided that any shares
thereby allocated to any such Holder that exceed such Holder's request shall
be reallocated among the remaining requesting Holders in like manner). In the
event that the number of Registrable Securities requested to be included in
such registration is less than the number which, in the opinion of the
managing underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to the number of
securities that, in the opinion of the underwriter, can be sold.
(g) ADDITIONAL RIGHTS. If the Company at any time grants to any
other holders of capital stock any rights to request the Company to effect the
registration under the Securities Act of any such shares of capital stock on
terms more favorable to such holders than the terms set forth in this Section
11.2, the terms of this Section 11.2 shall be deemed amended or supplemented
to the extent necessary to provide the Holders such more favorable rights and
benefits.
11.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the end of the
period within which a request for registration may be given to the
Company, file with the Commission a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, PROVIDED, HOWEVER, that the
Company may discontinue any registration of its securities which is being
effected pursuant to Section 11.1 at any time prior to the effective date
of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 270 days and to comply
with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the Commission thereunder with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended
505298\0057\02050\96AXKNAK.WAR
20
methods of disposition by the seller or sellers thereof set forth in
such registration statement; PROVIDED that before filing a
registration statement or prospectus, or any amendments or
supplements thereto, the Company will furnish to counsel selected
pursuant to Section 11.6 hereof by the Holders of the Registrable
Securities covered by such registration statement to represent such
Holders, copies of all documents proposed to be filed, which
documents will be subject to the review of such counsel;
(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of
the Registrable Securities by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each
seller shall reasonably request, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller, except that the Company shall not for
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the requirements
of this clause (iv), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities;
(vi) notify each seller of any such Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in clause (ii) of this Section 11.3, of the
Company's becoming aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, and at the request of
any such seller, prepare and furnish to such seller a reasonable number
of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration statement,
an earnings statement which shall satisfy the provisions of Section 11(a)
of the Securities Act and the rules and regulations promulgated
thereunder;
(viii) (A) if such Registrable Securities are Warrant Stock, use its
best efforts to list such Registrable Securities on any securities
exchange on which the Common Stock is then
505298\0057\02050\96AXKNAK.WAR
21
listed if such Registrable Securities are not already so listed and if
such listing is then permitted under the rules of such exchange; (B) if
such Registrable Securities are Warrants, upon the reasonable request of
sellers of a majority of such Registrable Securities, use its best
efforts to list the Warrants and, if requested, the Warrant Stock
underlying the Warrants, notwithstanding that at the time of request such
sellers hold only Warrants, on any securities exchange so requested, if
such Registrable Securities are not already so listed, and if such
listing is then permitted under the rules of such exchange; (C) and use
its best efforts to provide a transfer agent and registrar for such
Registrable Securities covered by such registration statement not later
than the effective date of such registration statement;
(ix) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification
provisions in favor of underwriters and other persons in addition to, or
in substitution for the provisions of Section 11.4 hereof, and take such
other actions as sellers of a majority of such Registrable Securities or
the underwriters, if any, reasonably requested in order to expedite or
facilitate the disposition of such Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accounts in customary form and covering matters of the
type customarily covered by "cold comfort" letters as the seller or
sellers of a majority of shares of such Registrable Securities shall
reasonably request (provided that Registrable Securities constitute at
least 25% of the securities covered by such registration statement);
(xi) make available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with
such registration statement;
(xii) notify counsel (selected pursuant to Section 11.6 hereof) for
the Holders of Registrable Securities included in such registration
statement and the managing underwriter or agent, immediately, and confirm
the notice in writing (i) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment
prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request of the Commission to amend the
registration statement or amend or supplement the prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the registration
statement for offering or sale in any jurisdiction, or of the institution
or threatening of any proceedings for any of such purposes;
(xiii) make every reasonable effort to prevent the issuance of any
stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment;
505298\0057\02050\96AXKNAK.WAR
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(xiv) if requested by the managing underwriter or agent or any
Holder of Registrable Securities covered by the registration statement,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or agent or such
Holder reasonably requests to be included therein, including, without
limitation, with respect to the number of Registrable Securities being
sold by such Holder to such underwriter or agent, the purchase price
being paid therefor by such underwriter or agent and with respect to any
other terms of the underwritten offering of the Registrable Securities to
be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable
after being notified of the matters incorporated in such prospectus
supplement or post-effective amendment;
(xv) cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing underwriter or agent, if any,
to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under
the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
agent, if any, or such Holders may request;
(xvi) obtain for delivery to the Holders of Registrable Securities
being registered and to the underwriter or agent an opinion or opinions
from counsel for the Company in customary form and in form, substance and
scope reasonably satisfactory to such Holders, underwriters or agents and
their counsel; and
(xvii) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind
described in clause (vi) of this Section 11.3, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Xxxxxx's receipt of
the copies of the supplemented or amended prospectus contemplated by clause
(vi) of this Section 11.3, and, if so directed by the Company, such Xxxxxx
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in clause (ii) of this Section 11.3 shall be extended by the number
of days during the period from and including the date of the giving of such
notice pursuant to clause (vi) of this Section 11.3 and including the date
when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 11.3.
11.4 INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the
event of any registration of any securities of the Company under the
Securities Act pursuant to Section 11.1 or 10.2, the Company will, and it
hereby does, indemnify and hold harmless, to the extent permitted by law, the
seller of any Registrable Securities covered by such registration statement,
each affiliate of such seller and their respective directors and officers or
general and limited partners (including any
505298\0057\02050\96AXKNAK.WAR
23
director, officer, affiliate, employee, agent and controlling Person of any of
the foregoing), each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act (collectively, the "INDEMNIFIED PARTIES"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorney's fees and reasonable expenses of
investigation) to which such Indemnified Party may become subject under the
Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof, whether
or not such Indemnified Party is a party thereto) arise out of or are based
upon (a) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (b)
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
a prospectus, in light of the circumstances under which they were made) not
misleading, and the Company will reimburse such Indemnified Party for any
legal or any other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, liability, action or
proceeding; PROVIDED that the Company shall not be liable to any Indemnified
Party in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or amendment
or supplement thereto or in any such preliminary, final or summary prospectus
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any Indemnified Party and shall survive the transfer
of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLER. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed in accordance with Section 11.3 herein, that the Company shall
have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 11.4) the Company and all other
prospective sellers with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any
amendment or supplement, if such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such seller or underwriter specifically stating that it is for use
in the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement, or a document incorporated by
reference into any of the foregoing. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling Persons and shall survive the transfer of
such securities by such seller. In no event shall the liability of any selling
Holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an Indemnified
Party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 11.4, such Indemnified Party will, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; PROVIDED that the
failure of the Indemnified Party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
505298\0057\02050\96AXKNAK.WAR
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subdivisions of this Section 11.4, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an Indemnified Party, unless in such Indemnified
Party's reasonable judgment a conflict of interest between such Indemnified
Party and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof, the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 11.4 from the indemnifying party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and Indemnified Parties in connection
with the actions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and Indemnified Parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or Indemnified
Parties, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action. The amount paid or payable
by a party under this Section 11.4 as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 11.4 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
(f) NON-EXCLUSIVITY. The obligations of the parties under this
Section 11.4 shall be in addition to any liability which any party may
otherwise have to any other party.
11.5 RULE 144. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
Holder of Registrable Securities, make publicly available such information),
and it will
505298\0057\02050\96AXKNAK.WAR
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take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule
144 under the Securities Act, as such Rule may be amended from time to time,
or (ii) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any Holder of Registrable Securities, the Company will
deliver to such Xxxxxx a written statement as to whether it has complied with
such requirements. Notwithstanding anything contained in this Section 11.5,
the Company may, with the consent of the Majority Holders, deregister under
Article 12 of the Exchange Act if it then is permitted to do so pursuant to
the Exchange Act and the rules and regulations thereunder.
11.6 SELECTION OF COUNSEL. In connection with any registration of
Registrable Securities pursuant to Sections 11.1 and 11.2 hereof, the Holders
of a majority of the Registrable Securities covered by any such registration
may select one counsel to represent all Holders of Registrable Securities
covered by such registration; PROVIDED, HOWEVER, that in the event that the
counsel selected as provided above is also acting as counsel to the Company in
connection with such registration, the remaining Holders shall be entitled to
select one additional counsel to represent all such remaining Holders.
11.7 HOLDBACK AGREEMENT. If any such registration shall be in
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any equity securities
of the Company, or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than
as part of such underwritten public offering), within 7 days before, or such
period not to exceed 180 days as the underwriting agreement may require (or
such lesser period as the managing underwriters may permit) after, the
effective date of such registration (except as part of such registration), and
the Company hereby also so agrees and agrees to cause each other holder of any
equity security, or of any security convertible into or exchangeable or
exercisable for any equity security, of the Company purchased from the Company
(at any time other than in a public offering) to so agree.
11.8 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Article 11 were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, it is agreed that they shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Article 11 and to enforce specifically the terms and provisions thereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law or in
equity.
ARTICLE 12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written agreement of the Holder shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like
tenor to such Holder (without expense to the Holder); PROVIDED, in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
505298\0057\02050\96AXKNAK.WAR
26
ARTICLE 13. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
ARTICLE 14. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver to CVCA and Paribas (so long as the CVCA
and Paribas hold any Warrant) and to each subsequent holder of a Warrant
representing at least 25% of the Warrant Shares:
(a) so long as the Note Purchase Agreement is in effect, all
financial statements, projections, certificates and other information required
to be delivered to the "Purchasers" pursuant to Section 6.1 of the Note
Purchase Agreement, the terms of which are incorporated herein by reference
and deemed to be a part hereof, which statements, projections, certificates
and other information will be delivered at such times as they are required to
be delivered to the "Purchasers" under the Note Purchase Agreement;
(b) from and after such time as the Note Purchase Agreement is no
longer in effect, all financial statements, projections, certificates and
other information required to be delivered by the Company and its Subsidiaries
to their senior lenders; and
(c) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company generally sends to its stockholders.
Except as otherwise required by law or judicial order or decree or
by any governmental agency or authority, each Person entitled to receive
information regarding the Company and its Subsidiaries under this Article 14
will maintain the confidentiality of all nonpublic information obtained by it
hereunder which the Company has reasonably designated as proprietary or
confidential in nature; provided that each such Person may disclose such
information in connection with the sale or transfer or proposed sale or
transfer of any Warrant Shares if such Person's transferee (or proposed
transferee) agrees in writing to be bound by the provisions of this paragraph.
ARTICLE 15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder hereof to receive shares of Common Stock, and no enumeration herein of
the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for any value subsequently assigned to the Common
Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company. Notwithstanding any other
provision of this Agreement, neither the general partners nor limited partners
of a Holder, nor any future general partners or limited partners of a Holder,
shall have any personal liability for performance of any obligation of a
Holder under this Agreement in excess of the respective capital contribution
of such general partner and limited partners to such Holder.
505298\0057\02050\96AXKNAK.WAR
27
ARTICLE 16. MISCELLANEOUS
16.1 NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder hereof shall
operate as a waiver of such right or otherwise prejudice such Holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to the Holder hereof such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by such Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
16.2 NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder, at its last known address appearing on the
books of the Company maintained for such purpose.
(b) If to the Company at:
Hanger Orthopedic Group, Inc.
0000 Xxx Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request, approval,
declaration, delivery or other communication to the person designated above to
receive a copy shall in no way adversely affect the effectiveness of such
notice, demand, request, approval, declaration, delivery or other
communication.
16.3 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
3.1 and Articles 10 and 12, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant, and shall be enforceable by any such Holder. Without limitation
to the foregoing, in the event that a Holder distributes or otherwise
transfers any shares of the Registrable Securities to any of its present or
future general or limited partners, the Company hereby acknowledges that the
registration rights granted pursuant to Article 11 of this Agreement shall be
transferred to such partner or partners on a pro rata basis, and that at or
after the time of any such distribution or transfer, any such partner or group
of partners may designate a Person to act on its behalf in delivering any
notices or making any requests hereunder.
16.4 AMENDMENT. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and holders of Warrants
505298\0057\02050\96AXKNAK.WAR
28
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then receivable upon exercise of all Warrants whether or not then
exercisable, provided that no such Warrant may be modified or amended in a
manner which is adverse to the CVCA or Paribas or any of its successors or
assigns, so long as such Person holds any Warrants or Warrant Stock, without
the prior written consent of such Person.
16.5 SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Warrant.
16.6 HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
16.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE COMPANY CONSENTS TO PERSONAL JURISDICTION, WAIVES ANY OBJECTION AS TO
JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK, STATE OF NEW YORK. THE
PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS WARRANT CERTIFICATE AND THE WARRANTS EVIDENCED HEREBY. SERVICE OF PROCESS
ON THE COMPANY OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE
PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 16.2.
16.8 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS AGREEMENT.
505298\0057\02050\96AXKNAK.WAR
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon.
Dated: November 1, 1996
HANGER ORTHOPEDIC GROUP, INC.
By /s/XXXXXXX X. XXXXX
--------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
505298\0057\02050\96AXKNAK.WAR
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of the accompanying Warrant
exercises such Warrant for _______ shares of Section 2.2(__) Warrant Stock(1)
of Hanger Orthopedic Group, Inc., all on the terms and conditions specified in
such Warrant and
[ ] herewith tenders payment of either (x) the Aggregate Exercise Price
in cash or (y) pursuant to the surrender by Holder of Notes having a
Fair Value equal to the Aggregate Exercise Price for the number of
shares of Common Stock specified above to the order of Hanger
Orthopedic Group, Inc. in the amount of $_________ in accordance
with the terms hereof; or
[ ] elects not to pay the Aggregate Exercise Price with respect to the
shares of Common Stock specified above and, in lieu thereof, elects
to surrender this Warrant (or the relevant portion thereof) in
exchange for such number of shares of Common Stock having an
aggregate value (based on the Market Price on the date hereof minus
the Exercise Price) equal to the Aggregate Exercise Price for the
number of shares requested for exercise above. ________ 1 Specify
the number of shares of Section 2.2(a) Warrant Stock and/or Section
2.2(b) Warrant Stock being exercised hereby.
-------------------------------
(1) Specify the number of shares of Section 2.2(a) Warrent Stock and/or
Section 2.2(b) Warrent Stock being exercised hereby.
505298\0057\02050\96AXKNAK.WAR
2
The undersigned requests that certificates for [all] [_________ of]
the shares of Common Stock to be received pursuant hereto (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _____________________________________________, whose address is
________________________________________ [add any additional names and
addresses together with the number of shares of Common Stock (and any
securities or other property issuable upon such exercise) to be issued to such
person or entity)], and, if such shares of Common Stock shall not include all
of the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
------------------------------
(Name of Registered Owner)
------------------------------
(Signature of Registered Owner)
------------------------------
(Street Address)
------------------------------
(City) (State) (Zip Code)
505298\0057\02050\96AXKNAK.WAR
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock, adjusted as of the date of this assignment as provided
in the Warrant, set forth below:
NO. OF SHARES OF
NAME AND ADDRESS OF ASSIGNEE COMMON STOCK
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer on the books of Hanger Orthopedic
Group, Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated: _______________________________
Print
Name: _______________________________
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
505298\0057\02050\96AXKNAK.WAR
EXECUTION COPY
WARRANT
TO PURCHASE COMMON STOCK OF
HANGER ORTHOPEDIC GROUP, INC.
Issuance Date: November 1, 1996
Number of Shares of Common Stock:
800,000 (subject to adjustment)
TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS.................................................... 1
ARTICLE 2. EXERCISE OF WARRANT............................................ 5
2.1 Manner of Exercise........................................... 5
2.2 Exercise Price............................................... 6
2.3 Payment of Taxes............................................. 7
2.4 Fractional Shares............................................ 7
2.5 Continued Validity........................................... 7
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL
WARRANTS....................................................... 7
3.1 Transfer .................................................... 7
3.2 Division and Combination..................................... 7
3.3 Expenses .................................................... 8
3.4 Maintenance of Books......................................... 8
ARTICLE 4. REDUCTION IN NUMBER OF ISSUABLE SHARES OF WARRANT
STOCK............................................................. 8
4.1 Share Reduction.............................................. 8
4.2 Pro Rata Effect.............................................. 8
4.3 New Warrants................................................. 8
ARTICLE 5. ADJUSTMENTS.................................................... 8
5.1 Stock Splits, Combinations, etc.............................. 8
5.2 Reclassification, Combinations, Mergers, etc................. 9
5.3 Issuance of Options or Convertible Securities................ 10
5.4 Dividends and Distributions.................................. 10
5.5 Self-Tenders................................................. 11
5.6 Issuance of Additional Shares of Common Stock................ 11
5.7 Certain Distributions........................................ 12
5.8 Consideration Received....................................... 12
5.9 Deferral or Exclusion of Certain Adjustments................. 12
5.10 Changes in Options and Convertible Securities............... 12
5.11 Expiration of Options and Convertible Securities............ 12
5.12 Other Adjustments........................................... 13
5.13 Other Action Affecting Common Stock......................... 13
ARTICLE 6. NOTICES TO WARRANT HOLDERS..................................... 13
6.1 Notice of Adjustments........................................ 13
6.2 Notice of Certain Corporate Action........................... 14
505298\0057\02050\96AXKLE3.WAR
PAGE
ARTICLE 7. NO IMPAIRMENT.................................................. 14
ARTICLE 8. COMMON STOCK; RESERVATION AND AUTHORIZATION
OF REGISTRATION WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY....................................... 14
ARTICLE 9. TAKING OF RECORD; STOCK AND WARRANT
TRANSFER BOOKS....................... 15
ARTICLE 10. RESTRICTIONS ON TRANSFERABILITY............................... 15
10.1 Restrictive Legend.......................................... 15
10.2 Restriction on Transfers.................................... 16
10.3 Listing on Securities Exchange or NASDAQ.................... 16
ARTICLE 11. REGISTRATION RIGHTS........................................... 17
11.1 Incidental Registrations.................................... 17
11.2 Registration on Request..................................... 18
11.3 Registration Procedures..................................... 19
11.5 Rule 144.................................................... 25
11.6 Selection of Counsel........................................ 25
11.7 Holdback Agreement.......................................... 25
ARTICLE 12. LOSS OR MUTILATION............................................ 25
ARTICLE 13. OFFICE OF THE COMPANY......................................... 26
ARTICLE 14. FINANCIAL AND BUSINESS INFORMATION............................ 26
ARTICLE 15. LIMITATION OF LIABILITY....................................... 26
ARTICLE 16. MISCELLANEOUS................................................. 27
16.1 Nonwaiver and Expenses...................................... 27
16.2 Notice Generally............................................ 27
16.3 Successors and Assigns...................................... 27
16.4 Amendment................................................... 28
16.5 Severability................................................ 28
16.6 Headings.................................................... 28
16.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE............ 28
16.8 MUTUAL WAIVER OF JURY TRIAL................................. 28
EXHIBIT A SUBSCRIPTION FORM
EXHIBIT B ASSIGNMENT FORM
505298\0057\02050\96AXKLE3.WAR
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH
THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE
SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER AND
THIS WARRANT.
WARRANT
TO PURCHASE 800,000 SHARES OF
COMMON STOCK (SUBJECT TO ADJUSTMENT) OF
HANGER ORTHOPEDIC GROUP, INC.
THIS IS TO CERTIFY THAT, for value received, CHASE VENTURE CAPITAL
ASSOCIATES, L.P., a California limited partnership (the "INITIAL HOLDER"), or
its registered assigns, is the owner of eight hundred thousand (800,000)
Warrants (as hereinafter defined), which entitle the Holder (as hereinafter
defined), at any time prior to the Expiration Date (as hereinafter defined),
to purchase from HANGER ORTHOPEDIC GROUP, INC., a Delaware corporation (the
"COMPANY"), eight hundred thousand (800,000) shares of Common Stock (as
hereinafter defined and such number subject to adjustment as provided herein),
in whole or in part, including fractional parts, all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
ARTICLE 1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of Common
Stock issued by the Company after the Issuance Date, other than the
Warrant Stock.
"AFFILIATE" shall mean, as to any Person, (i) any other Person
directly or indirectly controlling, controlled by, or under common
control with such Person or (ii) any director, officer or partner of such
Person or any Person specified in clause (i) above.
"AGGREGATE EXERCISE PRICE" shall mean, with respect to the exercise
of all or a portion of the Warrant, the Exercise Price multiplied by the
number of shares of Warrant Stock purchased upon such exercise.
"BUSINESS DAY" shall mean any day that is not a Saturday or Sunday
or a day on which banks are required or permitted to be closed in the
State of New York or the State of Maryland.
505298\0057\02050\96AXKLE3.WAR
2
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency then administering the Securities Act and other
federal securities laws.
"COMMON STOCK" shall mean the collective reference to the common
stock of the Company, par value $.01 per share, as constituted on the
Issuance Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the
holders of shares of Common Stock upon any reclassification thereof in
which the shares of Common Stock are converted into a new class of
capital stock and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 5.2) received by or
distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 5.2.
"CONVERTIBLE SECURITIES" shall have the meaning set forth in Section
5.3 hereof.
"CVCA" shall mean Chase Venture Capital Associates, L.P., a
California limited partnership.
"DEMAND PARTY" shall mean any other Holder or Holders that, either
individually or in aggregate with all other Holders with whom it is
acting together to demand registration, own(s) at least 50% of the total
number of Registrable Securities (whether in the form of Warrants or
Warrant Stock).
"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 from time
to time.
"EXERCISE PERIOD" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"EXERCISE PRICE" shall have the meaning set forth in Section 2.2
hereof.
"EXPIRATION DATE" shall mean the date which is the eighth
anniversary of the Issuance Date.
"FAIR VALUE" shall mean, with respect to the valuation of any
evidences of indebtedness, other securities, properties, assets, options,
warrants or subscription or purchase rights, the fair market value
thereof as determined in good faith by the Board of Directors of the
Company and, if required by the Majority Holders, supported by an opinion
from an investment banking firm acceptable to the Majority Holders, which
approval shall not be unreasonably withheld, of such Valuation
Properties; PROVIDED, HOWEVER that the Fair Value of any Notes tendered
in connection with any exercise of this Warrant pursuant to Section 2.1
shall be equal to the principal amount of such tendered Notes plus any
accrued and unpaid interest or other obligations owed in respect thereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"HOLDER" shall mean the Person in whose name this Warrant is
registered on the books of the Company maintained for such purpose or the
Person holding any Warrant Stock, including, without limitation, in each
case, transferees thereof.
505298\0057\02050\96AXKLE3.WAR
3
"ISSUANCE DATE" shall mean November 1, 1996.
"MAJORITY HOLDERS" shall mean the Holders of Warrants exercisable
for in excess of 50% of the aggregate number of shares of Common Stock
then receivable upon exercise of all Warrants.
"MARKET PRICE" shall mean, as of any exercise date or other relevant
date, the average of the per share closing prices of a share of Common
Stock for the 10 consecutive Trading Days immediately preceding such date
on the principal national securities exchange in the United States on
which the shares of Common Stock are listed or admitted to trading, or if
not listed or admitted to trading on any national securities exchange on
such Trading Day, on the National Association of Securities Dealers
Automated Quotations National Market System, or if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange or quoted on such National Market System on such Trading Day,
the average of the closing bid and asked prices of a share of Common
Stock in the over-the-counter market on such Trading Day as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company. If the Common Stock is not quoted or listed by any such
organization, exchange or market, the Market Price of the Common Stock as
of such exercise or other relevant date shall be determined in good faith
by the Board of Directors of the Company.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor entity thereto.
"NASDAQ" shall mean the National Association of Securities Dealers
Automatic Quotation System.
"NOTES" the 8.00% Senior Subordinated Notes issued pursuant to the
Note Purchase Agreement.
"NOTE PURCHASE AGREEMENT" shall mean the Senior Subordinated Note
Purchase Agreement, dated as of November 1, 1996, among the Company, CVCA
and Paribas.
"OPTIONS" shall have the meaning set forth in Section 5.3 hereof.
"OUTSTANDING" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or
for the account of the Company or any Subsidiary, and shall include all
shares issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock.
"PARIBAS" shall mean Paribas Principal, Inc.
"PERMITTED ISSUANCES" shall mean the issuance of shares of Common
Stock upon exercise of rights to acquire shares of Common Stock
exercisable pursuant to options held by employees or directors under
stock option plans which may from time to time be adopted by the Company
after the Issuance Date.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation,
505298\0057\02050\96AXKLE3.WAR
4
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"REGISTRABLE SECURITIES" shall mean (i) the Warrants and (ii) the
Warrant Stock. As to any particular Registrable Securities, once issued,
such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale by the Holder of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such
registration statement, (ii) such securities shall have been distributed
to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (iii) such securities shall have been otherwise
transferred, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require registration
or qualification of such securities under the Securities Act or any state
securities or blue sky law then in force, or (iv) such securities shall
have ceased to be Outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with Article 11 of this Agreement,
including, without limitation, (i) all Commission and stock exchange or
NASD registration and filing fees (including, if applicable, the fees and
expenses of any "qualified independent underwriter," as such term is
defined in Schedule E to the By-laws of the NASD, and of its counsel),
(ii) all fees and expenses of complying with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) all fees and
expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange pursuant to clause (viii) of
Section 11.3 and all rating agency fees, (v) the fees and disbursements
of counsel for the Company and of its independent public accountants,
including the expenses of any special audits and/or "cold comfort"
letters required by or incident to such performance and compliance, (vi)
the reasonable fees and disbursements of counsel selected pursuant to
Section 11.6 hereof by the Holders of the Registrable Securities being
registered to represent such Holders in connection with each such
registration, (vii) any fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities, including
liability insurance if the Company so desires or if the underwriters so
require, and the reasonable fees and expenses of any special experts
retained in connection with the requested registration, but excluding
underwriting discounts and commissions and certain transfer taxes, if
any, and (viii) other reasonable out-of-pocket expenses of Holders
(PROVIDED that such expenses shall not include expenses of counsel other
than those provided for in clause (vi) above).
"RESPONSIBLE OFFICER" shall mean the chief executive officer of the
Company, the president of the Company or the chief financial officer of
the Company.
"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.
"SUBSIDIARY" shall mean any corporation of which an aggregate of
more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned of record or beneficially by the Company and/or one or
more other Subsidiaries of the Company.
505298\0057\02050\96AXKLE3.WAR
5
"TENDER OFFER" shall mean any public offer to substantially all
holders of Common Stock to purchase at least 50% of the Common Stock at
the time outstanding.
"TRADING DAY" shall mean each weekday other than any day on which
any Common Stock is not traded on any national securities exchange, on
NASDAQ or in the over-the-counter market.
"TRANSFER" shall mean any disposition of any Warrant or Warrant
Stock or of any interest in either thereof, which would constitute a sale
or transfer of a beneficial interest thereof within the meaning of the
Securities Act (excluding any transfer to an Affiliate of the Initial
Holder).
"WARRANT STOCK" shall mean all shares of Common Stock issued or
issuable upon the exercise hereof, including any such shares of Common
Stock transferred to any transferee of such Holder.
"WARRANTS" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, this
Warrant. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of shares of Common Stock
for which they may be exercised.
ARTICLE 2. EXERCISE OF WARRANT
2.1 MANNER OF EXERCISE. At any time and from time to time from and
after the Issuance Date and until 5:00 P.M., New York time, on the Expiration
Date, Holder may exercise this Warrant, on any Business Day, for all or any
part of the number of shares of the Common Stock issuable hereunder; PROVIDED
that Holder may not exercise this Warrant if after giving effect to such
exercise the total number of shares of Common Stock issued upon exercise
hereof would exceed the product of:
(i) (a) 0.45, if such date of exercise is on or prior to November 1,
1997; or
(b) 0.50, if such date of exercise is on or prior to May 1, 1998
but after November 1, 1997; or
(c) 1.00, if such date is after May 1, 1998; times
(ii) the total number of shares of Common Stock issuable upon
exercise hereof as of the Issuance Date (as such number of
shares shall have been adjusted pursuant to Article 5
immediately prior to such exercise).
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 0000 Xxx Xxxxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxxx 00000 or at the office or agency designated by the Company
pursuant to Article 13, (i) a written notice of Xxxxxx's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock
to which the exercise shall relate and (ii) this Warrant. Such notice shall be
substantially in the form of the subscription form appearing at the end of
this Warrant as Exhibit A (the "SUBSCRIPTION FORM"), duly executed by Holder
or its agent or attorney.
Upon receipt by the Company of (a) this Warrant and (b) the
Subscription Form with the applicable box checked thereon, the Company shall
issue the number of shares of Common Stock set forth in the next paragraph.
505298\0057\02050\96AXKLE3.WAR
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To the extent Holder has checked the box on the Subscription Form
contemplating payment of either (x) the Aggregate Exercise Price in cash or
(y) pursuant to the surrender by Holder of Notes having a Fair Value equal to
the Aggregate Exercise Price in connection with an exercise hereof, then upon
payment, by certified or official bank check payable to the order of the
Company or by wire transfer of immediately available funds to an account
designated by the Company, of the Aggregate Exercise Price for the shares of
Warrant Stock to be purchased pursuant to the exercise of the Warrant, the
Company shall, as promptly as practicable, and in any event within two (2)
Business Days thereafter, execute or cause to be executed and deliver or cause
to be delivered to Holder a certificate or certificates representing the
aggregate number of shares of Common Stock issuable upon such exercise. To the
extent Holder has checked the box on the Subscription Form by which Holder
elects not to pay the Aggregate Exercise Price in cash and instead to make
such payment by way of Warrant surrender, the Company shall, as promptly as
practicable, and in any event within two (2) Business Days thereafter, (i)
execute or cause to be executed and deliver or cause to be delivered to Holder
a certificate or certificates representing the aggregate number of shares of
Common Stock to be issued to Holder upon such "cashless" exercise and (ii)
cancel the number of shares of Warrant Stock issuable upon exercise of this
Warrant having an aggregate value (based on the Market Price at the time of
exercise minus the Exercise Price) equal to the Aggregate Exercise Price for
the number of shares described in clause (i) above.
In either case, the stock certificate or certificates so delivered
shall be in such denomination or denominations as such Holder shall request in
the Subscription Form and shall be registered in the name of Holder or,
subject to Article 10, such other name as shall be designated in the
Subscription Form.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder or
any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the date the
notice is received by the Company.
If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
the Warrant Stock issued upon such exercise, deliver to Holder a new Warrant
evidencing the right of Holder to receive the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such exercise less
the number of shares issued pursuant to such exercise of this Warrant and/or,
where applicable, less the number of shares surrendered in non-cash payment in
connection with such exercise, which new Warrant shall in all respects (other
than number of shares) be identical to this Warrant.
2.2 EXERCISE PRICE. Subject to adjustment as hereinafter set forth,
the price payable upon exercise hereof (the "Exercise Price"), with respect to
each share of Common Stock, shall be:
(a) with respect to 335,150 shares of Common Stock (the "SECTION
2.2(A) WARRANT STOCK") issuable upon exercise hereof, $6.375; and
(b) with respect to 464,850 shares of Common Stock (the "SECTION
2.2(B) WARRANT STOCK") issuable upon exercise hereof, $4.00865.
2.3 PAYMENT OF TAXES. All shares of Common Stock issuable upon the
exercise of this Warrant shall be validly issued, fully paid and nonassessable
and shall have been issued free from any preemptive or similar right and shall
be free and clear of any lien, claim or similar charge or restriction. The
Company shall pay all expenses in connection with, and all documentary, stamp
or similar issue or transfer taxes, if any, and all other taxes and other
governmental charges that may be
505298\0057\02050\96AXKLE3.WAR
7
imposed with respect to, the issue and delivery of this Warrant, and all
shares of capital stock and other securities or property issuable or
deliverable upon the exercise of this Warrant, and shall indemnify and hold
any Holder, its directors, agents, general and limited partners and Affiliates
from any taxes, interest and penalties which may become payable by any of such
Persons as a result of the failure or delay by the Company to pay such taxes
or charges. The Company shall not be required, however, to pay any tax or
other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Common Stock issuable upon exercise of this
Warrant in any name other than that of Holder and its Affiliates.
2.4 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Common Stock on the exercise of Warrants. If any fraction
of a share of Common Stock would be issuable on the exercise of any Warrant
(or specified portion thereof), the Company shall pay to the Holder of the
Warrant an amount in cash equal to such fraction multiplied by the
then-current Market Price per share of Common Stock. For the purposes of this
Section 2.3, the date from which the Market Price of Common Stock shall be
computed shall be the date on which notice is received by the Company pursuant
to Section 2.1.
2.5 CONTINUED VALIDITY. A Holder of shares of Warrant Stock shall
continue to be entitled with respect to such shares to all rights and subject
to all obligations to which it would have been entitled or subject as Holder
of this Warrant under Articles 10, 11, 14 and 16 of this Warrant.
ARTICLE 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL WARRANTS
3.1 TRANSFER. Subject to compliance with Article 10, transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to
in Section 2.1 or the office or agency designated by the Company pursuant to
Article 13, together with a written assignment of this Warrant substantially
in the form of Exhibit B hereto duly executed by Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable pursuant to
Section 2.3 upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall, subject to Article 10, execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Article 10, may be exercised by a new
Holder for the receipt of shares of Common Stock without having a new Warrant
issued. If requested by the Company, a new Holder shall acknowledge in
writing, in form reasonably satisfactory to the Company, such Xxxxxx's
continuing obligations under Articles 10 and 16.
3.2 DIVISION AND COMBINATION. Subject to Article 10, this Warrant
may be divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Xxxxxx or its agent or attorney. Subject to compliance with Section
3.1 and with Article 10, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or combined
in accordance with such notice.
505298\0057\02050\96AXKLE3.WAR
8
3.3 EXPENSES. The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes not payable by the Company pursuant to
Section 2.3) the new Warrant or Warrants under this Article 3.
3.4 MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration or transfer of the
Warrants.
ARTICLE 4. REDUCTION IN NUMBER OF ISSUABLE SHARES OF WARRANT STOCK
4.1 SHARE REDUCTION. If, prior to May 1, 1998, the Company shall
have repaid in full all amounts borrowed pursuant to the Note Purchase
Agreement on or prior to the dates set forth in clause (i) below, then the
number of shares of Common Stock issuable upon exercise of this Warrant as of
the close of business on the date of such repayment shall be reduced (but not
below zero) by that number of shares which is equal to the product of: (i)
0.55, if such date of repayment is on or prior to November 1, 1997, or 0.50,
if such date of repayment is on or prior to May 1, 1998 but after November 1,
1997; and (ii) the total number of shares of Common Stock issuable upon
exercise hereof as of the Issuance Date (as such number of shares shall have
been adjusted pursuant to Article 5 prior to such close of business).
4.2 PRO RATA EFFECT. Any reduction in shares pursuant to Section 4.1
shall be applied to reduce the number of shares of Section 2.2(a) Warrant
Stock and Section 2.2(b) Warrant Stock then issuable, pro rata, based on the
relative number of shares in each such category then issuable (but not then
issued) upon exercise of this Warrant. No reduction in shares pursuant to
Section 4.2 shall have any effect on any Section 2.2(a) Warrant Stock and/or
Section 2.2(b) Warrant Stock issued prior to such reduction.
4.3 NEW WARRANTS. Upon any reduction pursuant to this Article 4, the
Company (at its own expense and subject to Section 2.3) will deliver to Holder
a new Warrant evidencing the rights of Holder to receive the number of shares
of Common Stock upon exercise of this Warrant less the number of shares to
which such reduction relates, which new Warrant shall in all respects (other
than number of shares) be identical to this Warrant.
ARTICLE 5. ADJUSTMENTS
The Exercise Price and the number of shares of Common Stock for
which this Warrant is exercisable shall be subject to adjustment from time to
time as set forth in this Article 5. The Company shall give each Holder notice
of any event described below which requires an adjustment pursuant to this
Article 5 at the time of such event. At any time and from time to time, the
Company shall promptly, without any action required of the Holders, cause the
appropriate adjustment or adjustments (to the extent that more than one event
requiring an adjustment has occurred since the last adjustment made) to be
made pursuant to this Article 5 in respect of each Warrant outstanding.
5.1 STOCK SPLITS, COMBINATIONS, ETC.. In case the Company shall
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Additional Common Stock or of
capital stock of any other class), (B) subdivide its outstanding shares of
Common Stock or (C) combine its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to
such action shall be adjusted so that the Holder of any Warrant thereafter
exercised shall be entitled to receive the number of shares of Capital Stock
of the Company which such Holder would have owned immediately following such
action had such Warrant been exercised immediately prior thereto. An
adjustment made pursuant to this
505298\0057\02050\96AXKLE3.WAR
9
paragraph shall become effective immediately after the record date in the case
of a dividend and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification. If, as a result
of an adjustment made pursuant to this paragraph, the Holder of any Warrant
thereafter exercised shall become entitled to receive shares of two or more
classes of Capital Stock of the Company, the Board of Directors of the Company
shall in good faith determine the allocation of the adjusted Exercise Price
between or among shares of such classes of Capital Stock.
5.2 RECLASSIFICATION, COMBINATIONS, MERGERS, ETC.. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in Section 5.1 above and
other than a change in par value, or from par value to no par value, or from
no par value to par value or as a result of a subdivision or combination), or
in case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other Capital Stock issuable upon
exercise of the Warrants (other than a change in par value, or from par value
to no par value, or from no par value to par value or as a result of a
subdivision or combination)) or in case of any sale or conveyance to another
corporation of all or substantially all of the assets of the Company, then, as
a condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company or such a successor or purchasing corporation, as the
case may be, shall forthwith make lawful and adequate provision whereby the
Holder of such Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares
of Common Stock issuable upon exercise of such Warrant immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance and
enter into a supplemental warrant agreement so providing. Such provisions
shall include provision for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 5. If the
issuer of securities deliverable upon exercise of Warrants under the
supplemental warrant agreement is an Affiliate of the formed, surviving or
transferee corporation, that issuer shall join in the supplemental warrant
agreement. The above provisions of this Section 5.2 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant Agreement to be performed and observed by the Company and all the
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of the Common Stock
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Article 5. For purposes of
this Section 5.2 "shares of stock and other securities" of a successor or
acquiring corporation shall include stock of such corporation of any class
which is not preferred as to dividends or assets over any other class of stock
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 5.2 shall similarly
apply to successive reorganizations, reclassifications, mergers,
consolidations or disposition of assets.
5.3 ISSUANCE OF OPTIONS OR CONVERTIBLE SECURITIES In the event the
Company shall, at any time or from time to time after the date hereof, issue,
sell, distribute or otherwise grant in any
505298\0057\02050\96AXKLE3.WAR
10
manner (including by assumption) to all holders of the Common Stock any rights
to subscribe for or to purchase, or any warrants or options for the purchase
of, Common Stock or any stock or securities convertible into or exchangeable
for Common Stock (any such rights, warrants or options being herein called
"OPTIONS" and any such convertible or exchangeable stock or securities being
herein called "CONVERTIBLE SECURITIES") or any Convertible Securities (other
than upon exercise of any Option), whether or not such Options or the rights
to convert or exchange such Convertible Securities are immediately
exercisable, and the price per share at which Common Stock is issuable upon
the exercise of such Options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (i) the aggregate amount, if
any, received or receivable by the Company as consideration for the issuance,
sale, distribution or granting of such Options or any such Convertible
Security, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Options or upon
conversion or exchange of all such Convertible Securities, plus, in the case
of Options to acquire Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the conversion or exchange of
all such Convertible Securities, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities or upon the
conversion or exchange of all Convertible Securities issuable upon the
exercise of all such Options) shall be less than the Market Price per share of
Common Stock on the record date for the issuance, sale, distribution or
granting of such Options (any such event being herein called a "DISTRIBUTION")
then, effective upon such Distribution, the Exercise Price shall be reduced to
the price (calculated to the nearest 1/1,000 of one cent) determined by
multiplying the Exercise Price in effect immediately prior to such
Distribution by a fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding (exclusive of any treasury
shares) immediately prior to such Distribution multiplied by the Market Price
per share of Common Stock on the date of such Distribution plus (ii) the
consideration, if any, received by the Company upon such Distribution, and the
denominator of which shall be the product of (A) the total number of shares of
Common Stock outstanding (exclusive of any treasury shares) immediately after
such Distribution multiplied by (B) the Market Price per share of Common Stock
on the record date for such Distribution. For purposes of the foregoing, the
total maximum number of shares of Common Stock issuable upon exercise of all
such Options or upon conversion or exchange of all such Convertible Securities
or upon the conversion or exchange of the total maximum amount of the
Convertible Securities issuable upon the exercise of all such Options shall be
deemed to have been issued as of the date of such Distribution and thereafter
shall be deemed to be outstanding and the Company shall be deemed to have
received as consideration therefor such price per share, determined as
provided above. Except as provided in Sections 5.9 and 5.10 below, no
additional adjustment of the Exercise Price shall be made upon the actual
exercise of such Options or upon conversion or exchange of the Convertible
Securities or upon the conversion or exchange of the Convertible Securities
issuable upon the exercise of such Options.
5.4 DIVIDENDS AND DISTRIBUTIONS. In the event the Company shall, at
any time or from time to time after the date hereof, distribute to all the
holders of Common Stock any dividend or other distribution of cash, evidences
of its indebtedness, other securities or other properties or assets (in each
case other than (i) dividends payable in Additional Common Stock, Options or
Convertible Securities and (ii) any cash dividend from current or retained
earnings), or any options, warrants or other rights to subscribe for or
purchase any of the foregoing, then (A) the Exercise Price shall be decreased
to a price determined by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the Market Price per share of Common
Stock on the record date for such distribution less the sum of (X) the cash
portion, if any, of such distribution per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such distribution
plus (Y) the then fair market value (as determined in good faith by the Board
of Directors of the Company) per share of Common Stock outstanding (exclusive
of any treasury shares) on the record date for such distribution of that
portion, if any, of such distribution consisting of evidences of indebtedness,
other securities, properties,
505298\0057\02050\96AXKLE3.WAR
11
assets, options, warrants or subscription or purchase rights, and the
denominator of which shall be such Market Price per share of Common Stock and
(B) the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock so purchasable immediately prior to the record date for
such distribution by a fraction, the numerator of which shall be the Exercise
Price in effect immediately prior to the adjustment required by clause (A) of
this sentence and the denominator of which shall be the Exercise Price in
effect immediately after such adjustment. The adjustments required by this
Section 5.4 shall be made whenever any such distribution occurs retroactive to
the record date for the determination of stockholders entitled to receive such
distribution.
5.5 SELF-TENDERS. In case of the consummation of a tender or
exchange offer (other than an odd-lot tender offer) made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock to the
extent that the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the first reported sales price per
share of Common Stock on the trading day next succeeding the Expiration Time,
the Exercise Price shall be reduced so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to
the Expiration Time by a fraction the numerator of which shall be the number
of shares of Common Stock outstanding (including any tendered or exchanged
shares) at the Expiration Time multiplied by the first reported sales price of
the Common Stock on the trading day next succeeding the Expiration Time, and
the denominator shall be the sum of (A) the fair market value (determined by
the Board of Directors of the Company, whose determination shall be conclusive
and described in a resolution of the Board of Directors) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all shares
validly tendered or exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to as the
"PURCHASED SHARES") and (B) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on the Expiration Time and the
first reported sales price of the Common Stock on the trading day next
succeeding the Expiration Time, such reduction to become effective immediately
prior to the opening of business on the day following the Expiration Time.
5.6 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If at any time
the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock for consideration in an amount per
Additional Share of Common Stock less than the Market Price, then the number
of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product obtained by multiplying the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to such
issue or sale by a fraction (A) the numerator of which shall be the number of
shares of Common Stock outstanding immediately after such issue or sale, and
(B) the denominator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale, and (2) the
aggregate consideration received from the issuance or sale of the Additional
Shares of Common Stock divided by the Market Price. For the purposes of this
Section 5.6, the date as of which the Market Price per share of Common Stock
shall be computed shall be the earlier of (a) the date on which the Company
shall enter into a firm contract for the issuance of such Additional Shares of
Common Stock or (b) the date of actual issuance of such Additional Shares of
Common Stock. Notwithstanding the foregoing, no adjustment shall be made under
this Section for issuances of Additional Shares of Common Stock (i) with
respect to Permitted Issuances or (ii) upon exercise of the Warrants.
5.7 CERTAIN DISTRIBUTIONS. If the Company shall pay a dividend or
make any other distribution payable in Options or Convertible Securities,
then, for purposes of Section 5.3 above, such Options or Convertible
Securities shall be deemed to have been issued or sold without consideration.
505298\0057\02050\96AXKLE3.WAR
12
5.8 CONSIDERATION RECEIVED. If any shares of Common Stock, Options
or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board
of Directors of the Company). If any Options shall be issued in connection
with the issuance and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued without consideration; PROVIDED, HOWEVER, that if such
Options have an exercise price equal to or greater than the Market Price of
the Common Stock on the date of issuance of such Options, then such Options
shall be deemed to have been issued for consideration equal to such exercise
price.
5.9 DEFERRAL OR EXCLUSION OF CERTAIN ADJUSTMENTS. No adjustment to
the Exercise Price (including the related adjustment to the number of shares
of Common Stock purchasable upon the exercise of each Warrant) shall be
required hereunder unless such adjustment, together with other adjustments
carried forward as provided below, would result in an increase or decrease of
at least one percent (1%) of the Exercise Price; PROVIDED that any adjustments
which by reason of this Section 5.9 are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. No
adjustment need be made for a change in the par value of the Common Stock. All
calculations under this Article shall be made to the nearest 1/1,000 of one
cent or to the nearest 1/1000th of a share, as the case may be. No adjustment
to the Exercise Price shall be made at any time hereunder in connection with
the issuance by the Company of a warrant to purchase 35,000 shares of Common
Stock at an exercise price of $2.44 pursuant to the warrant agreement, dated
as of November 1, 1996, among Hanger Orthopedic Group, Inc., X.X. Xxxxxx, Inc.
of Georgia and Xxxx X. Xxxxxxxxxx.
5.10 CHANGES IN OPTIONS AND CONVERTIBLE SECURITIES. If the exercise
price provided for in any Options referred to in Section 5.3 above, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 5.3 above, or the rate at
which any Convertible Securities referred to in Section 5.3 above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Article 5), the Exercise Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock
so purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
5.11 EXPIRATION OF OPTIONS AND CONVERTIBLE SECURITIES. If, at any
time after any adjustment to the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall have been made pursuant to Sections
5.3 or 5.10 above or this Section 5.11, any Options or Convertible Securities
shall have expired unexercised, the number of such shares so purchasable
shall, upon such expiration, be readjusted and shall thereafter be such as
they would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares of
Common Stock deemed to have been issued in connection with such Options or
Convertible Securities were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Options or Convertible Securities and
(ii) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale, distribution or
505298\0057\02050\96AXKLE3.WAR
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granting of all such Options or Convertible Securities, whether or not
exercised; PROVIDED that no such readjustment shall have the effect of
decreasing the number of such shares so purchasable by an amount (calculated
by adjusting such decrease to account for all other adjustments made pursuant
to this Article 5 following the date of the original adjustment referred to
above) in excess of the amount of the adjustment initially made in respect of
the issuance, sale, distribution or granting of such Options or Convertible
Securities.
5.12 OTHER ADJUSTMENTS. In the event that at any time, as a result
of an adjustment made pursuant to this Article 5, the Holders shall become
entitled to receive any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so receivable upon
exercise of the Warrants and the Exercise Price applicable to such exercise
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares
of Common Stock contained in this Article 5.
5.13 OTHER ACTION AFFECTING COMMON STOCK. In case at any time or
from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this Article 5, then the number of
shares of Common Stock or other stock for which this Warrant is exercisable
shall be adjusted in such manner as may be equitable in the circumstances. If
the Company shall at any time and from time to time issue or sell (i) any
shares of any class of common stock other than Common Stock, (ii) any
evidences of its indebtedness, shares of stock or other securities which are
convertible into or exchangeable for such shares of common stock, with or
without the payment of additional consideration in cash or property or (iii)
any warrants or other rights to subscribe for or purchase any such shares of
common stock or any such evidences, shares of stock or other securities, then
in each such case such issuance shall be deemed to be of, or in respect of,
Common Stock for purposes of this Article 5; PROVIDED, HOWEVER, that, without
limiting the generality of the foregoing, if the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend payable in, or other distribution of, common stock other
than Common Stock, including shares of non-voting common stock, then the
number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the aggregate number of shares of such common stock and of Common Stock which
a record holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event would
own or be entitled to receive after the happening of such event.
ARTICLE 6. NOTICES TO WARRANT HOLDERS
6.1 NOTICE OF ADJUSTMENTS. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, and the Exercise Price payable
therefor, shall be adjusted pursuant to Article 5, the Company shall forthwith
prepare a certificate to be executed by a member of the Board of Directors or
one of its executive officers, setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of
Directors of the Company determined the fair market value of any evidences of
indebtedness. other securities, properties, assets, options, warrants or
subscription or purchase rights), specifying the number of shares of Common
Stock for which this Warrant is exercisable and (if such adjustment was made
pursuant to Section 5.2, 5.12 or 5.13) describing the number and kind of any
other shares of stock or property for which this Warrant is exercisable. In
the event that the Majority Holders shall challenge any of the calculations
set forth in such certificate within 20 days after the Company's notification
thereof, the Company shall retain a firm of independent certified public
accountants of national standing selected by the Company and reasonably
acceptable to the Majority Holders, to prepare and execute a certificate
verifying the
505298\0057\02050\96AXKLE3.WAR
14
method by which the adjustment was calculated, the number of shares of Common
Stock for which this Warrant is exercisable and (if such adjustment was made
pursuant to Section 5.2, 5.12 or 5.13) describing the number and kind of any
other shares of stock or property for which this Warrant is exercisable. The
Company shall promptly cause a signed copy of any certificate prepared
pursuant to this Section 6.1 to be delivered to each Holder in accordance with
Section 16.2. The Company shall keep at its office or agency designated
pursuant to Article 13 copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours by any
Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
6.2 NOTICE OF CERTAIN CORPORATE ACTION. The Holder of any Warrant
shall be entitled to the same rights to receive notice of corporate action as
any holder of Common Stock.
ARTICLE 7. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant,
and (b) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Xxxxxx, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
ARTICLE 8. COMMON STOCK; RESERVATION AND AUTHORIZATION OF
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY
From and after the Issuance Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise
of any Warrant in accordance with the terms of such Warrant, shall be validly
issued, fully paid and nonassessable and shall have been issued free from any
preemptive or similar right and shall be free and clear of any lien, claim or
similar charge or restriction.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable, the
Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
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If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Article 11) before such shares may be so issued, the Company will
in good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered.
ARTICLE 9. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company
to the holders of its Common Stock with respect to which any provision of
Article 5 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time close its
stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of any Warrant.
ARTICLE 10. RESTRICTIONS ON TRANSFERABILITY
10.1 RESTRICTIVE LEGEND. (a) Except as otherwise provided in this
Article 10, each certificate for Warrant Stock initially issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
transferee of any such certificate, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND ARE SUBJECT TO CERTAIN PROVISIONS SPECIFIED IN A CERTAIN WARRANT
DATED NOVEMBER 1, 1996, ORIGINALLY ISSUED BY HANGER ORTHOPEDIC GROUP,
INC. (THE "WARRANT"), AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR
ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE
RESTRICTED BY THE PROVISIONS OF, THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS THEREUNDER AND THE WARRANT. A COPY OF THE
FORM OF SAID WARRANT IS ON FILE WITH THE SECRETARY OF HANGER ORTHOPEDIC
GROUP, INC. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT."
(b) Except as otherwise provided in this Article 10, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED
WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED
BY THE PROVISIONS OF, THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES
AND REGULATIONS THEREUNDER AND THIS WARRANT."
505298\0057\02050\96AXKLE3.WAR
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10.2 RESTRICTION ON TRANSFERS. (a) Subject to Section 10.2(b) below,
prior to any Transfer of any Warrants or any shares of Warrant Stock (other
than a Transfer by a Holder to the Company), the Holder of such Warrants or
Warrant Stock shall deliver notice of such Transfer to the Company. Upon the
Company's receipt of such notice, such Holder shall be entitled to Transfer
such Warrants or such Warrant Stock in compliance with the Securities Act.
Each certificate, if any, evidencing such shares of Warrant Stock issued upon
such Transfer shall bear the restrictive legend set forth in Section 10.1(a),
and each Warrant issued upon such Transfer shall bear the restrictive legend
set forth in Section 10.1(b), unless such legend is not required in order to
ensure compliance with the Securities Act.
(b) Notwithstanding any other provision of this Warrant, the
restrictions imposed by this Article 10 upon transferability of the Warrants
and the Warrant Stock and the legend requirements of Section 10.1, shall
terminate as to any particular Warrant or share of Warrant Stock when and so
long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto. Whenever the restrictions
imposed by this Article 10 shall terminate as to this Warrant, as hereinabove
provided, the Holder hereof shall be entitled to receive from the Company, at
the expense of the Company, a new Warrant bearing the following legend in
place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THIS WARRANT CONTAINED IN
ARTICLE 10 HEREOF TERMINATED ON ____________, ____, AND ARE OF NO FURTHER
FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions
imposed by this Article 10 shall terminate as to any share of Warrant Stock,
as hereinabove provided, the Holder thereof shall be entitled to receive from
the Company, at the Company's expense, a new certificate representing such
Common Stock not bearing the restrictive legend set forth in Section 10.1(a).
(c) Notwithstanding anything in this Warrant to the contrary, in the
event of a Tender Offer, the restrictive legends referred to in Sections
9.1(a) and 9.1(b) may be omitted from any Warrants or Warrant Stock sold by a
Holder to the maker of the Tender Offer.
10.3 LISTING ON SECURITIES EXCHANGE OR NASDAQ. If the Company shall
list any shares of Common Stock on any securities exchange or on NASDAQ, it
will, at its expense, list thereon, maintain and, when necessary, increase
such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange or NASDAQ rules, issuable
upon the exercise of this Warrant so long as any shares of Common Stock shall
be so listed during any such Exercise Period.
10.4 COVENANT REGARDING CONSENTS. The Company hereby covenants to
use its best efforts upon request of one or more Holders to seek any waivers
or consents, or to take any other action required, to effectuate the exercise
of this Warrant by any Holder.
ARTICLE 11. REGISTRATION RIGHTS
11.1 INCIDENTAL REGISTRATIONS. (a) RIGHT TO INCLUDE REGISTRABLE
SECURITIES. If the Company at any time after the date hereof proposes to
register its Common Stock (or any security which is convertible into or
exchangeable or exercisable for Common Stock) under the Securities Act
505298\0057\02050\96AXKLE3.WAR
17
(other than a registration on Form S-4 or S-8, or any successor or other forms
promulgated for similar purposes), whether or not for sale for its own
account, in a manner which would permit registration of Registrable Securities
for sale to the public under the Securities Act, it will, at each such time,
give prompt written notice to all Holders of Registrable Securities of its
intention to do so and of such Holders' rights under this Section 11.1. Upon
the written request of any such Holder made within 15 days after the receipt
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such Holder), the Company will use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holders
thereof, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered; PROVIDED that (i) if, at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to proceed with
the proposed registration of the securities to be sold by it, the Company may,
at its election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten offering,
all Holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as apply
to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate in
combined primary and secondary offerings. If a registration requested pursuant
to this Section 11.1(a) involves an underwritten public offering, any Holder
of Registrable Securities requesting to be included in such registration may
elect, in writing prior to the effective date of the registration statement
filed in connection with such registration, not to register such securities in
connection with such registration. Nothing in this Section 11.1 shall operate
to limit the right of Holder to (i) request the registration of Warrant Stock
issuable upon exercise of Warrants held by such Holder notwithstanding the
fact that at the time of request, such Holder holds only Warrants or (ii)
request the registration at one time of both Warrants and Warrant Stock.
(b) EXPENSES. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 11.1.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS. If a registration pursuant
to this Section 11.1 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, so as to be likely to have an adverse
effect on the price, timing or distribution of the Securities offered in such
offering as contemplated by the Company (other than the Registrable
Securities), then the Company will include in such registration (i) first,
100% of the securities the Company proposes to sell and (ii) second, to the
extent of the number of Registrable Securities requested to be included in
such registration which, in the opinion of such managing underwriter, can be
sold without having the adverse effect referred to above, the number of
Registrable Securities which the Holders have requested to be included in such
registration, such amount to be allocated pro rata among all requesting
Holders on the basis of the relative number of shares of Registrable
Securities then held by each such Holder (provided that any shares thereby
allocated to any such Holder that exceed such Xxxxxx's request will be
reallocated among the remaining requesting Holders in like manner).
11.2 REGISTRATION ON REQUEST. (a) REQUEST BY THE DEMAND PARTY. At
any time, upon the written request of the Demand Party requesting that the
Company effect the registration under the Securities Act of all or part of
such Demand Party's Registrable Securities and specifying the amount and
intended method of disposition thereof, the Company will promptly give written
notice of such
505298\0057\02050\96AXKLE3.WAR
18
requested registration to all other Holders of such Registrable Securities,
and thereupon will, as expeditiously as possible, use its best efforts to
effect the registration under the Securities Act of:
(i) such Registrable Securities which the Company has been so
requested to register by the Demand Party; and
(ii) all other Registrable Securities as are to be registered at the
request of a Demand Party and which the Company has been requested to
register by any other Holder thereof by written request given to the
Company within 15 days after the giving of such written notice by the
Company (which request shall specify the amount and intended method of
disposition of such Registrable Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended method thereof as aforesaid) of the Registrable Securities so to be
registered; PROVIDED, that, unless Holders of a majority of the Registrable
Securities held by Holders consent thereto in writing, the Company shall not
be obligated to file a registration statement relating to any registration
request under this Section 11.2(a) (x) within a period of nine months after
the effective date of any other registration statement relating to any
registration request under this Section 11.2(a) which was not effected on Form
S-3 (or any successor or similar short-form registration statement) or
relating to any registration effected under Section 11.1, or (y) if with
respect thereto the managing underwriter, the Commission, the Securities Act
or the rules and regulations thereunder, or the form on which the registration
statement is to be filed, would require the conduct of an audit other than the
regular audit conducted by the Company at the end of its fiscal year, in which
case the filing may be delayed until the completion of such regular audit
(unless the Holders of the Registrable Securities to be registered agree to
pay the expenses of the Company in connection with such an audit other than
the regular audit). Nothing in this Section 11.2 shall operate to limit the
right of Holder to (i) request the registration of Warrant Stock issuable upon
exercise of Warrants held by such Holder notwithstanding the fact that at the
time of request, such Holder holds only Warrants or (ii) request the
registration at one time of both Warrants and Warrant Stock.
(b) REGISTRATION STATEMENT FORM. If any registration requested
pursuant to this Section 11.2 which is proposed by the Company to be effected
by the filing of a registration statement on Form S-3 (or any successor or
similar short-form registration statement) shall be in connection with an
underwritten public offering, and if the managing underwriter shall advise the
Company in writing that, in its opinion, the use of another form of
registration statement is of material importance to the success of such
proposed offering, then such registration shall be effected on such other
form.
(c) EXPENSES. The Company will pay all Registration Expenses in
connection with the first two (2) registrations of each class or series of
Registrable Securities pursuant to this Section 11.2 upon the written request
of any of the Holders; PROVIDED that the Company will pay Registration
Expenses in connection with an additional two (2) such registrations if the
Company shall have not repaid in full all amounts borrowed pursuant to the
Note Purchase Agreement on or prior to May 1, 1998; PROVIDED, FURTHER that any
requested registration by Holder of both Warrants and Warrant Stock at one
time shall only count as one registration. All expenses for any subsequent
registrations of Registrable Securities pursuant to this Section 11.2 shall be
paid pro rata by the Company and all other Persons (including the Holders)
participating in such registration on the basis of the relative number of
Warrants or shares of Warrant Stock, as the case may be, of each such person
whose Registrable Securities are included in such registration.
(d) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 11.2 will not be deemed to have been effected unless
it has become effective and all of the Registrable
505298\0057\02050\96AXKLE3.WAR
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Securities registered thereunder have been sold; PROVIDED that if, within 180
days after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order, injunction
or other order or requirement of the Commission or other governmental agency
or court, such registration will be deemed not to have been effected.
(e) SELECTION OF UNDERWRITERS. If a requested registration pursuant
to this Section 11.2 involves an underwritten offering, the Holders of a
majority of the Registrable Securities which are held by Holders and which the
Company has been requested to register shall have the right to select the
investment banker or bankers and managers to administer the offering;
PROVIDED, HOWEVER, that such investment banker or bankers and managers shall
be reasonably satisfactory to the Company.
(f) PRIORITY IN REQUESTED REGISTRATIONS. If a requested registration
pursuant to this Section 11.2 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion, the
number of securities requested to be included in such registration (including
securities of the Company which are not Registrable Securities) exceeds the
number which can be sold in such offering, the Company will include in such
registration only the Registrable Securities requested to be included in such
registration. In the event that the number of Registrable Securities requested
to be included in such registration exceeds the number which, in the opinion
of such managing underwriter, can be sold, the number of such Registrable
Securities to be included in such registration shall be allocated pro rata
among all requesting Holders on the basis of the relative number of
Registrable Securities then held by each such Holder (provided that any shares
thereby allocated to any such Holder that exceed such Holder's request shall
be reallocated among the remaining requesting Holders in like manner). In the
event that the number of Registrable Securities requested to be included in
such registration is less than the number which, in the opinion of the
managing underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to the number of
securities that, in the opinion of the underwriter, can be sold.
(g) ADDITIONAL RIGHTS. If the Company at any time grants to any
other holders of capital stock any rights to request the Company to effect the
registration under the Securities Act of any such shares of capital stock on
terms more favorable to such holders than the terms set forth in this Section
11.2, the terms of this Section 11.2 shall be deemed amended or supplemented
to the extent necessary to provide the Holders such more favorable rights and
benefits.
11.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
the Company will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the end of the
period within which a request for registration may be given to the
Company, file with the Commission a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, PROVIDED, HOWEVER, that the
Company may discontinue any registration of its securities which is being
effected pursuant to Section 11.1 at any time prior to the effective date
of the registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 270 days and to comply
with the provisions of the Securities Act, the Exchange Act and the rules
and regulations of the Commission thereunder with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended
505298\0057\02050\96AXKLE3.WAR
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methods of disposition by the seller or sellers thereof set forth in such
registration statement; PROVIDED that before filing a registration
statement or prospectus, or any amendments or supplements thereto, the
Company will furnish to counsel selected pursuant to Section 11.6 hereof
by the Holders of the Registrable Securities covered by such registration
statement to represent such Holders, copies of all documents proposed to
be filed, which documents will be subject to the review of such counsel;
(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits filed therewith,
including any documents incorporated by reference), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of
the Registrable Securities by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each
seller shall reasonably request, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller, except that the Company shall not for
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the requirements
of this clause (iv), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof to consummate the disposition of
such Registrable Securities;
(vi) notify each seller of any such Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period mentioned in clause (ii) of this Section 11.3, of the
Company's becoming aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing, and at the request of
any such seller, prepare and furnish to such seller a reasonable number
of copies of an amended or supplemental prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration statement,
an earnings statement which shall satisfy the provisions of Section 11(a)
of the Securities Act and the rules and regulations promulgated
thereunder;
(viii) (A) if such Registrable Securities are Warrant Stock, use its
best efforts to list such Registrable Securities on any securities
exchange on which the Common Stock is then
505298\0057\02050\96AXKLE3.WAR
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listed if such Registrable Securities are not already so listed and if
such listing is then permitted under the rules of such exchange; (B) if
such Registrable Securities are Warrants, upon the reasonable request of
sellers of a majority of such Registrable Securities, use its best
efforts to list the Warrants and, if requested, the Warrant Stock
underlying the Warrants, notwithstanding that at the time of request such
sellers hold only Warrants, on any securities exchange so requested, if
such Registrable Securities are not already so listed, and if such
listing is then permitted under the rules of such exchange; (C) and use
its best efforts to provide a transfer agent and registrar for such
Registrable Securities covered by such registration statement not later
than the effective date of such registration statement;
(ix) enter into such customary agreements (including an underwriting
agreement in customary form), which may include indemnification
provisions in favor of underwriters and other persons in addition to, or
in substitution for the provisions of Section 11.4 hereof, and take such
other actions as sellers of a majority of such Registrable Securities or
the underwriters, if any, reasonably requested in order to expedite or
facilitate the disposition of such Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accounts in customary form and covering matters of the
type customarily covered by "cold comfort" letters as the seller or
sellers of a majority of shares of such Registrable Securities shall
reasonably request (provided that Registrable Securities constitute at
least 25% of the securities covered by such registration statement);
(xi) make available for inspection by any seller of such Registrable
Securities covered by such registration statement, by any underwriter
participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all pertinent
financial and other records, pertinent corporate documents and properties
of the Company, and cause all of the Company's officers, directors and
employees to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with
such registration statement;
(xii) notify counsel (selected pursuant to Section 11.6 hereof) for
the Holders of Registrable Securities included in such registration
statement and the managing underwriter or agent, immediately, and confirm
the notice in writing (i) when the registration statement, or any
post-effective amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any amendment
prospectus shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request of the Commission to amend the
registration statement or amend or supplement the prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the registration
statement for offering or sale in any jurisdiction, or of the institution
or threatening of any proceedings for any of such purposes;
(xiii) make every reasonable effort to prevent the issuance of any
stop order suspending the effectiveness of the registration statement or
of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal of
any such order at the earliest possible moment;
505298\0057\02050\96AXKLE3.WAR
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(xiv) if requested by the managing underwriter or agent or any
Holder of Registrable Securities covered by the registration statement,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or agent or such
Holder reasonably requests to be included therein, including, without
limitation, with respect to the number of Registrable Securities being
sold by such Holder to such underwriter or agent, the purchase price
being paid therefor by such underwriter or agent and with respect to any
other terms of the underwritten offering of the Registrable Securities to
be sold in such offering; and make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable
after being notified of the matters incorporated in such prospectus
supplement or post-effective amendment;
(xv) cooperate with the Holders of Registrable Securities covered by
the registration statement and the managing underwriter or agent, if any,
to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing securities to be sold under
the registration statement, and enable such securities to be in such
denominations and registered in such names as the managing underwriter or
agent, if any, or such Holders may request;
(xvi) obtain for delivery to the Holders of Registrable Securities
being registered and to the underwriter or agent an opinion or opinions
from counsel for the Company in customary form and in form, substance and
scope reasonably satisfactory to such Holders, underwriters or agents and
their counsel; and
(xvii) cooperate with each seller of Registrable Securities and each
underwriter or agent participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information regarding such seller and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind
described in clause (vi) of this Section 11.3, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such Xxxxxx's receipt of
the copies of the supplemented or amended prospectus contemplated by clause
(vi) of this Section 11.3, and, if so directed by the Company, such Xxxxxx
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the period
mentioned in clause (ii) of this Section 11.3 shall be extended by the number
of days during the period from and including the date of the giving of such
notice pursuant to clause (vi) of this Section 11.3 and including the date
when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (vi) of this Section 11.3.
11.4 INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. In the
event of any registration of any securities of the Company under the
Securities Act pursuant to Section 11.1 or 10.2, the Company will, and it
hereby does, indemnify and hold harmless, to the extent permitted by law, the
seller of any Registrable Securities covered by such registration statement,
each affiliate of such seller and their respective directors and officers or
general and limited partners (including any
505298\0057\02050\96AXKLE3.WAR
23
director, officer, affiliate, employee, agent and controlling Person of any of
the foregoing), each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act (collectively, the "INDEMNIFIED PARTIES"), against any and all
losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorney's fees and reasonable expenses of
investigation) to which such Indemnified Party may become subject under the
Securities Act, common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof, whether
or not such Indemnified Party is a party thereto) arise out of or are based
upon (a) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or (b)
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein (in the case of
a prospectus, in light of the circumstances under which they were made) not
misleading, and the Company will reimburse such Indemnified Party for any
legal or any other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, liability, action or
proceeding; PROVIDED that the Company shall not be liable to any Indemnified
Party in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or amendment
or supplement thereto or in any such preliminary, final or summary prospectus
in reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller specifically
stating that it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller or any Indemnified Party and shall survive the transfer
of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLER. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed in accordance with Section 11.3 herein, that the Company shall
have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 11.4) the Company and all other
prospective sellers with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any
amendment or supplement, if such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such seller or underwriter specifically stating that it is for use
in the preparation of such registration statement, preliminary, final or
summary prospectus or amendment or supplement, or a document incorporated by
reference into any of the foregoing. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Company
or any of the prospective sellers, or any of their respective affiliates,
directors, officers or controlling Persons and shall survive the transfer of
such securities by such seller. In no event shall the liability of any selling
Holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an Indemnified
Party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 11.4, such Indemnified Party will, if a claim in
respect thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action; PROVIDED that the
failure of the Indemnified Party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
505298\0057\02050\96AXKLE3.WAR
24
subdivisions of this Section 11.4, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an Indemnified Party, unless in such Indemnified
Party's reasonable judgment a conflict of interest between such Indemnified
Party and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified
to the extent that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the indemnifying party to such
Indemnified Party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof, the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 11.4 from the indemnifying party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and Indemnified Parties in connection
with the actions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and Indemnified Parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or Indemnified
Parties, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such action. The amount paid or payable
by a party under this Section 11.4 as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Section 11.4 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
(f) NON-EXCLUSIVITY. The obligations of the parties under this
Section 11.4 shall be in addition to any liability which any party may
otherwise have to any other party.
11.5 RULE 144. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and
the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
Holder of Registrable Securities, make publicly available such information),
and it will
505298\0057\02050\96AXKLE3.WAR
25
take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule
144 under the Securities Act, as such Rule may be amended from time to time,
or (ii) any similar rule or regulation hereafter adopted by the Commission.
Upon the request of any Holder of Registrable Securities, the Company will
deliver to such Xxxxxx a written statement as to whether it has complied with
such requirements. Notwithstanding anything contained in this Section 11.5,
the Company may, with the consent of the Majority Holders, deregister under
Article 12 of the Exchange Act if it then is permitted to do so pursuant to
the Exchange Act and the rules and regulations thereunder.
11.6 SELECTION OF COUNSEL. In connection with any registration of
Registrable Securities pursuant to Sections 11.1 and 11.2 hereof, the Holders
of a majority of the Registrable Securities covered by any such registration
may select one counsel to represent all Holders of Registrable Securities
covered by such registration; PROVIDED, HOWEVER, that in the event that the
counsel selected as provided above is also acting as counsel to the Company in
connection with such registration, the remaining Holders shall be entitled to
select one additional counsel to represent all such remaining Holders.
11.7 HOLDBACK AGREEMENT. If any such registration shall be in
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 under the Securities Act, of any equity securities
of the Company, or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than
as part of such underwritten public offering), within 7 days before, or such
period not to exceed 180 days as the underwriting agreement may require (or
such lesser period as the managing underwriters may permit) after, the
effective date of such registration (except as part of such registration), and
the Company hereby also so agrees and agrees to cause each other holder of any
equity security, or of any security convertible into or exchangeable or
exercisable for any equity security, of the Company purchased from the Company
(at any time other than in a public offering) to so agree.
11.8 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Article 11 were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, it is agreed that they shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Article 11 and to enforce specifically the terms and provisions thereof in any
court of competent jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law or in
equity.
ARTICLE 12. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written agreement of the Holder shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like
tenor to such Holder (without expense to the Holder); PROVIDED, in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
505298\0057\02050\96AXKLE3.WAR
26
ARTICLE 13. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
ARTICLE 14. FINANCIAL AND BUSINESS INFORMATION
The Company will deliver to CVCA and Paribas (so long as the CVCA
and Paribas hold any Warrant) and to each subsequent holder of a Warrant
representing at least 25% of the Warrant Shares:
(a) so long as the Note Purchase Agreement is in effect, all
financial statements, projections, certificates and other information required
to be delivered to the "Purchasers" pursuant to Section 6.1 of the Note
Purchase Agreement, the terms of which are incorporated herein by reference
and deemed to be a part hereof, which statements, projections, certificates
and other information will be delivered at such times as they are required to
be delivered to the "Purchasers" under the Note Purchase Agreement;
(b) from and after such time as the Note Purchase Agreement is no
longer in effect, all financial statements, projections, certificates and
other information required to be delivered by the Company and its Subsidiaries
to their senior lenders; and
(c) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company generally sends to its stockholders.
Except as otherwise required by law or judicial order or decree or
by any governmental agency or authority, each Person entitled to receive
information regarding the Company and its Subsidiaries under this Article 14
will maintain the confidentiality of all nonpublic information obtained by it
hereunder which the Company has reasonably designated as proprietary or
confidential in nature; provided that each such Person may disclose such
information in connection with the sale or transfer or proposed sale or
transfer of any Warrant Shares if such Person's transferee (or proposed
transferee) agrees in writing to be bound by the provisions of this paragraph.
ARTICLE 15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder hereof to receive shares of Common Stock, and no enumeration herein of
the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for any value subsequently assigned to the Common
Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company. Notwithstanding any other
provision of this Agreement, neither the general partners nor limited partners
of a Holder, nor any future general partners or limited partners of a Holder,
shall have any personal liability for performance of any obligation of a
Holder under this Agreement in excess of the respective capital contribution
of such general partner and limited partners to such Holder.
505298\0057\02050\96AXKLE3.WAR
27
ARTICLE 16. MISCELLANEOUS
16.1 NONWAIVER AND EXPENSES. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder hereof shall
operate as a waiver of such right or otherwise prejudice such Holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to the Holder hereof such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by such Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
16.2 NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or made
if in writing and either delivered in person with receipt acknowledged or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder, at its last known address appearing on the
books of the Company maintained for such purpose.
(b) If to the Company at:
Hanger Orthopedic Group, Inc.
0000 Xxx Xxxxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail. Failure or
delay in delivering copies of any notice, demand, request, approval,
declaration, delivery or other communication to the person designated above to
receive a copy shall in no way adversely affect the effectiveness of such
notice, demand, request, approval, declaration, delivery or other
communication.
16.3 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
3.1 and Articles 10 and 12, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company and
the successors and assigns of the Holder hereof. The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant, and shall be enforceable by any such Holder. Without limitation
to the foregoing, in the event that a Holder distributes or otherwise
transfers any shares of the Registrable Securities to any of its present or
future general or limited partners, the Company hereby acknowledges that the
registration rights granted pursuant to Article 11 of this Agreement shall be
transferred to such partner or partners on a pro rata basis, and that at or
after the time of any such distribution or transfer, any such partner or group
of partners may designate a Person to act on its behalf in delivering any
notices or making any requests hereunder.
16.4 AMENDMENT. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and holders of Warrants
505298\0057\02050\96AXKLE3.WAR
28
exercisable for in excess of 50% of the aggregate number of shares of Common
Stock then receivable upon exercise of all Warrants whether or not then
exercisable, provided that no such Warrant may be modified or amended in a
manner which is adverse to the CVCA or Paribas or any of its successors or
assigns, so long as such Person holds any Warrants or Warrant Stock, without
the prior written consent of such Person.
16.5 SEVERABILITY. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Warrant.
16.6 HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
16.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE COMPANY CONSENTS TO PERSONAL JURISDICTION, WAIVES ANY OBJECTION AS TO
JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK, STATE OF NEW YORK. THE
PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS WARRANT CERTIFICATE AND THE WARRANTS EVIDENCED HEREBY. SERVICE OF PROCESS
ON THE COMPANY OR HOLDER IN ANY ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN ACCORDANCE WITH THE
PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 16.2.
16.8 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER THIS AGREEMENT.
505298\0057\02050\96AXKLE3.WAR
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon.
Dated: November 1, 1996
HANGER ORTHOPEDIC GROUP, INC.
By /s/XXXXXXX X. XXXXX
----------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
505298\0057\02050\96AXKLE3.WAR
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of the accompanying Warrant
exercises such Warrant for _______ shares of Section 2.2(__) Warrant Stock(1)
of Hanger Orthopedic Group, Inc., all on the terms and conditions specified in
such Warrant and
[ ] herewith tenders payment of either (x) the Aggregate Exercise Price
in cash or (y) pursuant to the surrender by Holder of Notes having a
Fair Value equal to the Aggregate Exercise Price for the number of
shares of Common Stock specified above to the order of Hanger
Orthopedic Group, Inc. in the amount of $_________ in accordance with
the terms hereof; or
[ ] elects not to pay the Aggregate Exercise Price with respect to the
shares of Common Stock specified above and, in lieu thereof, elects
to surrender this Warrant (or the relevant portion thereof) in
exchange for such number of shares of Common Stock having an
aggregate value (based on the Market Price on the date hereof minus
the Exercise Price) equal to the Aggregate Exercise Price for the
number of shares requested for exercise above. -------- 1 Specify
the number of shares of Section 2.2(a) Warrant Stock and/or Section
2.2(b) Warrant Stock being exercised hereby.
-------------------------------
(1) Specify the number of shares of Section 2.2(a) Warrent Stock and/or
Section 2.2(b) Warrent Stock being exercised hereby.
505298\0057\02050\96AXKLE3.WAR
2
The undersigned requests that certificates for [all] [_________ of]
the shares of Common Stock to be received pursuant hereto (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _____________________________________________, whose address is
________________________________________ [add any additional names and
addresses together with the number of shares of Common Stock (and any
securities or other property issuable upon such exercise) to be issued to such
person or entity)], and, if such shares of Common Stock shall not include all
of the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
---------------------------------
(Name of Registered Owner)
---------------------------------
(Signature of Registered Owner)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
505298\0057\02050\96AXKLE3.WAR
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock, adjusted as of the date of this assignment as provided
in the Warrant, set forth below:
NO. OF SHARES OF
NAME AND ADDRESS OF ASSIGNEE COMMON STOCK
and does hereby irrevocably constitute and appoint _____________________
attorney-in-fact to register such transfer on the books of Hanger Orthopedic
Group, Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated: _______________________________
Print
Name: _______________________________
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
505298\0057\02050\96AXKLE3.WAR
