FORM OF COMMON STOCK PURCHASE WARRANT
Exhibit 10.7 | EXECUTION COPY |
FORM OF COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS PROVIDED HEREIN, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS PERMITTED UNDER RULE 144 OF THE ACT OR IS OTHERWISE EXEMPT FROM SUCH REGISTRATION.
Warrant Shares: 1,000,000 | Issue Date: March 28, 2014 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, NNA of Nevada, Inc., its successors and permitted assigns (together, “Holder”) is entitled, at any time on or after March 28, 2017 (the “Third Anniversary Date”), and prior to 5:00 p.m., New York City time, on March 28, 2021 (the “Expiration Date”), to purchase from Apollo Medical Holdings, Inc., a Delaware corporation (“Company”), up to the number of fully paid and non-assessable shares (the “Shares”) of Common Stock, par value $0.001 per share, of Company (the “Common Stock”) specified above (the “Warrant Shares”) at an initial exercise price of $1.00 per Share (the “Warrant Exercise Price”) or to convert this Warrant into Shares, in each case subject to the provisions and upon the terms and conditions set forth in this Warrant. This Warrant has been issued pursuant to an Investment Agreement, dated as of March 28, 2014, between Company and Holder (as it may be amended from time to time in accordance with its terms, the “Investment Agreement”). Subject to Section 2, to the extent this Warrant has been issued in connection with Holder’s purchase of the Convertible Note, Holder may exercise this Warrant only upon Holder making the term loan to Company pursuant to Section 2.1 of the Convertible Note. Capitalized terms used herein and not defined shall have the meanings given thereto in the Investment Agreement.
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(a) If Company shall at any time after the Closing Date and until and including the earlier of (i) the second anniversary of the Closing Date and (ii) Company’s Next Financing issue or sell any shares of Common Stock or Common Stock Equivalents in a Subsequent Issuance (other than an Exempt Issuance) for a consideration per share less than $0.90 (subject to adjustment pursuant to this Section 2)(a “Dilutive Issuance”), then the Warrant Number shall be adjusted by multiplying the Warrant Number immediately prior thereto by a fraction, the numerator of which shall be the Warrant Exercise Price then in effect and the denominator of which shall be the per share consideration received or to be received by Company in such Dilutive Issuance; provided that the Warrant Shares issued upon any prior exercise of this Warrant shall be disregarded (as if the exercise of this Warrant and the issuance of such Warrant Shares as a result thereof had never happened) to the extent necessary to achieve the same readjustment to the Warrant under this Section 2.5(a) as if there had been no prior exercise of this Warrant. If Company shall sell or issue shares of Common Stock for a consideration consisting, in whole or in part, of property other than cash or its equivalent, then in determining the fair market value per share and the consideration received or receivable by or payable to Company for purposes of this Section 2.5, the fair value of such property shall be determined reasonably and in good faith by the Company Board. As used herein, “Company’s Next Financing” means the closing of a Subsequent Issuance yielding gross cash proceeds in an aggregate amount of at least $2,000,000.
(b) In the event that Company at any time issues, sells or grants any Common Stock Equivalents in a Dilutive Issuance (other than an Exempt Issuance), then, for purposes of this Section 2.5, Company shall be deemed to have issued at that time, pursuant to Section 2.5(a), a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or shall become issuable upon the exercise of the purchase, conversion or exchange rights associated with such Common Stock Equivalents for consideration per share equal to the sum of (i) the aggregate consideration per share received by Company in connection with the issuance, sale or grant of such Common Stock Equivalents, plus (ii) the minimum amount of consideration per share receivable by Company in connection with the exercise of such Common Stock Equivalents. If, at any time after any adjustment of the Warrant Number shall have been made pursuant to Section 2.5(a) as the result of any issuance, sale or grant of any Common Stock Equivalents, any of such Common Stock Equivalents or the rights of purchase, conversion or exchange associated therewith shall expire, the Warrant Number then in effect shall be decreased to the Warrant Number that would have been in effect if such expiring Common Stock Equivalents or rights of purchase, conversion or exchange had never been issued. Similarly, if, at any time after any such adjustment of the Warrant Number shall have been made pursuant to Section 2.5(a), there is a change in (x) the consideration received or to be received by Company in connection with the issuance or exercise of such Common Stock Equivalents, or (y) the conversion ratio applicable to such Common Stock Equivalents so that a different number shares of Common Stock shall be issuable upon the conversion or exchange thereof, the Warrant Number then in effect shall be readjusted to the Warrant Number that would have been in effect had such changes taken place at the time that such Common Stock Equivalents were initially issued, granted or sold. In no event shall any readjustment under this Section 2.5(b) affect the validity of any Warrant Shares issued upon any exercise of this Warrant prior to such readjustment; provided that the Warrant Shares issued upon any such prior exercise of this Warrant shall be disregarded (as if the exercise of this Warrant and the issuance of such Warrant Shares as a result thereof had never happened) to the extent necessary to achieve the same readjustment to the Warrant under this Section 2.5(b) as if there had been no such prior exercise of this Warrant. To the extent that an adjustment to the Warrant Number is made pursuant to Section 2.5(a), upon the issuance of Common Stock Equivalents, no further adjustment shall be made pursuant to Section 2.5(a) upon the issuance of Common Stock upon exercise or conversion of such Common Stock Equivalents.
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(c) To the extent that any Equity-Based Payments are made by Company or any Subsidiary, the Holder of this Warrant shall then be entitled to, and Company shall pay to the Holder of this Warrant in cash, simultaneously with and as a condition to making such Equity-Based Payments, an amount equal to Holder’s pro rata share of the sum of (i) the amount of such Equity-Based Payments and (ii) the payments made to the Holder of this Warrant under this paragraph with respect to such Equity-Based Payments. Holder’s pro rata share, for purposes of this Section 2.5(c), is the ratio of the number of shares of Common Stock, Conversion Shares and Warrant Shares owned by Holder immediately prior to the Equity-Based Payment to the total number of shares of Common Stock outstanding, without giving effect to Common Stock Equivalents, immediately prior to the Equity-Based Payment.
2.7 Determination of Adjustments.
(a) Upon any event that shall require an adjustment pursuant to this Section 2, Company shall promptly calculate such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth, in reasonable detail, such adjustment, the method of calculation thereof and the facts upon which such adjustment is based, including a statement of (i) the number of shares of Common Stock then outstanding on a Fully Diluted Basis and (ii) the Warrant Number, both as in effect immediately prior to such adjustment and as adjusted on account thereof. Company shall promptly mail a copy of each such certificate to the Holder. In the event that the Holder objects to the computation of such adjustment prepared by Company within 30 Business Days after receipt thereof, Company shall promptly cause a firm of independent certified public accountants of nationally recognized standing reasonably acceptable to the Holder to calculate such adjustment and mail a copy of such computation to the Holder, and the computation of such accountants shall be conclusive. Company shall keep at its principal office copies of all such certificates and cause the same to be available for inspection at such office during normal business hours by the Holder.
(b) For purposes of this Section 2, the consideration received or receivable by Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock or Common Stock Equivalents, irrespective of the accounting treatment of such consideration, shall be valued as follows:
(i) Cash Payment. In the case of cash, the amount received by Company for such issuance, sale, grant or exercise.
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(ii) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Company Board.
(iii) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of Company for a consideration that covers both, the consideration received (calculated as provided in (i) and (ii) above) shall be allocable to such shares of Common Stock as determined in good faith by the Company Board.
(iv) Allocation Related to Common Stock Equivalents. In case any Common Stock Equivalents shall be issued or sold together with other securities or other assets of Company, together constituting one integral transaction in which no specific consideration is allocated to the Common Stock Equivalents, the consideration allocable to such Common Stock Equivalents shall be determined in good faith by the Company Board.
(v) Merger or Consolidation. In case any shares of Common Stock or Common Stock Equivalents shall be issued or granted in connection with any merger or combination in which Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the assets and business of the nonsurviving corporation attributable to such Common Stock or Common Stock Equivalents, as determined in good faith by the Company Board.
(c) The following additional provisions shall be applicable to the adjustments provided for pursuant to this Section 2:
(i) When Adjustments to be Made. The adjustments required by this Section 2 shall be made whenever and as often as any specified event requiring such an adjustment shall occur and shall be effective (A) in the case of any dividend or distribution of Common Stock to the holders of Common Stock, immediately after the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution, and (B) in the case of any other specified event, at the close of business on the date of such specified event.
(ii) Record Date. In case Company shall take a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock or other securities or (B) to subscribe for or purchase Common Stock or other securities, then all references in this Section 2 to the date of the issuance or sale of such shares of Common Stock or other securities shall be deemed to be references to such record date; provided, however, that in the event Company legally abandons such action before its occurrence, then no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled.
(iii) Fractional Interests. In computing adjustments under this Section 2, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share; provided, however, that any resulting fractional Share interests shall be settled upon exercise or conversion of this Warrant in accordance with Section 1.6.
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(iv) Maximum Warrant Exercise Price. At no time shall the Warrant Exercise Price exceed the amount set forth in the introductory paragraph of this Warrant except as the proper result of an adjustment pursuant to this Section 2.
(v) Certain Limitations. Notwithstanding anything herein to the contrary, Company agrees not to enter into any transaction that, by reason of any adjustment hereunder, would cause the Warrant Exercise Price to be less than the par value per share of its Common Stock.
(vi) Independent Application. Except as otherwise provided herein, all sections and subsections of this Section 2 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one section or subsection, all applicable sections and subsections shall be given independent effect.
2.8 Breach of Representation and Warranty.
(a) Without limitation of all other remedies available to the Holder in this Warrant or otherwise, in the event that any representation and warranty set forth in Section 3.6 of the Investment Agreement was not true when made, Company shall issue to the Holder, at no cost to the Holder, an additional amount of Warrants such that, if such issuance of additional Warrants were made on the Closing Date, the representation and warranty in the last sentence of Section 3.6(b) of the Investment Agreement would have been true and accurate in all respects when made.
(b) Any additional Warrants issued to the Holder pursuant to this Section 2.8 shall be treated as if they were issued on the Closing Date and shall reflect any dividends or other distributions that would have been accrued or have been payable with respect to, and the application of any antidilution, ratable treatment or similar provisions (as set forth herein, in applicable law or otherwise) that would have been applicable to, such Warrants or underlying Warrant Shares had such additional Warrants been issued on the Closing Date.
(c) In connection with the issuance of any additional Warrants under this Section 2.8, Company shall reserve a sufficient number of shares of Common Stock for issuance to the Holder upon exercise of such additional Warrants.
3. CERTAIN AGREEMENTS. Company hereby covenants and agrees as follows:
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4. TRANSFER AND REPLACEMENT OF WARRANT.
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5. REGISTRATION RIGHTS; MARKET STAND-OFF AGREEMENT.
(a) The shares of Common Stock issuable upon exercise or conversion of this Warrant shall be “Registrable Securities” under that certain Registration Rights Agreement, dated as of March 28, 2014, by and between Company and Holder.
(b) In the event of a Qualified IPO, Holder hereby agrees that it will not, if so requested by the managing underwriter for such Qualified IPO, without the prior written consent of such managing underwriter, during the period commencing on the date of the final prospectus relating to such Qualified IPO, and ending on the date specified by such managing underwriter (such period not to exceed one hundred eighty (180) days, or such other period as may be requested by such underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports, and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock (whether such shares or any such securities are then owned by Holder or are thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 5(b) shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to Holder only if all Company officers and directors are subject to the same restrictions. The underwriters in connection with such Qualified IPO are intended third-party beneficiaries of this Section 5(b) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such Qualified IPO that are consistent with this Section 5(b) or that are necessary to give further effect thereto.
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if to Company, to:
000 X. Xxxxx Xxxx., Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Fax: (000) 000-0000
if to Holder, to:
NNA of Nevada, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx/Xxxxxxxxx Xxxxx
Telephone: (000) 000-0000/(000) 000-0000
Fax:(000) 000-0000
Company or Holder may, by notice given hereunder, designate any further or different addresses or telecopy numbers to which subsequent demands, notices, approvals, consents, requests or other communications shall be sent or persons to whose attention the same shall be directed.
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6.6 Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
[signature page follows]
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IN WITNESS WHEREOF, the parties have duly executed and delivered this Common Stock Purchase Warrant by their duly authorized representatives as of the date first above written.
COMPANY: | |
APOLLO MEDICAL HOLDINGS, INC. |
By: | /s/ Xxxx Xxxxxxx | |
Name: | Xxxx Xxxxxxx | |
Title: | CFO |
Signature Page to Purchase Warrant (1 of 2)
[Convertible Note]
HOLDER: | |
NNA OF NEVADA, INC. |
By: | /s/ Xxxx Xxxxxxx | |
Name: | Xxxx Xxxxxxx | |
Title: | Vice President and Treasurer |
Signature Page to Purchase Warrant (2 of 2)
[Convertible Note]
APPENDIX 1
NOTICE OF EXERCISE
TO: APOLLO MEDICAL HOLDINGS, INC.
1. The undersigned hereby elects to purchase _____ Shares of the Common Stock of Apollo Medical Holdings, Inc. pursuant to the terms of the attached Common Stock Purchase Warrant (the “Warrant”) issued to the undersigned (or the undersigned’s predecessor or assignor), and shall tender payment of the exercise price in full in accordance with the terms of the Warrant.
2. Payment shall take the form of (check applicable box):
¨ | in lawful money of the United States; or |
¨ | the cancellation of such number of Shares as is necessary, in accordance with the formula set forth in Section 1.2 of the Warrant, to exercise the Warrant with respect to the maximum number of Shares purchasable pursuant to the cashless exercise procedure set forth in Section 1.2 of the Warrant. |
3. Please issue a certificate or certificates (or, if applicable, Book-Entry Shares) representing said Shares in the name of the undersigned or in such other name as is specified below:
The Shares shall be delivered by physical delivery of a certificate (or, if applicable, Book-Entry Shares) to:
[SIGNATURE OF HOLDER]
Name of Holder:
Signature of Authorized Signatory of Holder:
Name of Authorized Signatory:
Title of Authorized Signatory:
Date:
Date of exercise under Section 1.1 of the Warrant or date of exercise of conversion right under Section 1.2 of the Warrant is the date this Notice is deemed effectively given under Section 6.2 of this Warrant.
APPENDIX 2
ASSIGNMENT FORM
(To Assign the foregoing Warrant, execute
this form and supply required information.
Do not use this form to exercise the Warrant.)
FOR VALUE RECEIVED,
(check first box OR fill in number of Shares in second box)
[___] all of the Warrant
OR
[__________] shares of the foregoing Warrant
and all rights evidenced thereby are hereby assigned to:
_________________________________________ whose address is ____________________________________________ ___________________________________________________________________________________________________.
Dated: ____________________, _________ |
Holder’s Signature: | ||
Holder’s Address: | ||