THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MUST BE HELD
INDEFINITELY UNLESS SUBSEQUENTLY REGISTERED UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR DISPOSED OF PURSUANT TO
AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
WARRANT
Company: Allied Healthcare Products, Inc., a Delaware corporation
Number of Shares: 25,000
Class of Stock: Common Stock
Initial Exercise Price: $7.025 per share
Issued as of: August 7, 1997
Expiration Date: August 7, 2002
FOR VALUE RECEIVED, the adequacy and receipt of which is hereby
acknowledged, ALLIED HEALTHCARE PRODUCTS, INC., a Delaware corporation,
hereby certifies that WOODBOURNE PARTNERS, L.P., a Missouri limited
partnership ("Woodbourne"), and its successors and assigns, are entitled to
purchase from the Company at any time and from time to time on and after
August 7, 1998, until 12:00 midnight California local time on the Expiration
Date at an initial exercise price of SEVEN AND 025/1000 DOLLARS ($7.025) per
share of Common Stock Twenty Five Thousand (25,000) fully paid and
nonassessable shares of Common Stock of the Company on the terms and
conditions hereinafter set forth.
The number of such shares of Common Stock and the Exercise Price are
subject to adjustment as provided in this Warrant. Anything contained in
this Warrant to the contrary notwithstanding, the number of shares of Common
Stock which may be issued upon exercise of this Warrant by any Regulated
Warrantholder shall never exceed such amount (the "Maximum Amount") as may be
permitted under the Bank Holding Company Act, or any successor statute, or
under any other federal or state banking laws or regulations to which such
Regulated Warrantholder may be subject at the time of such exercise. If the
number of shares of Common Stock which may be issued upon exercise of this
Warrant exceeds the Maximum Amount, the number of shares of Common Stock into
which this Warrant may be exercised will be reduced to the Maximum Amount and
the Company will pay
to Foothill by check or in cash such amount that equals the Exercise Price
multiplied by the number of shares of Common Stock by which the Warrant is
reduced pursuant to this paragraph.
1. CERTAIN DEFINITIONS. As used in this Warrant, the following
terms have the following definitions:
"Additional Shares of Common Stock" means all shares of Common Stock
issued or issuable by the Company after the date of this Warrant.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, and includes any common stock of the Company of any class or classes
resulting from any reclassification or reclassifications thereof which is not
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends and in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding
up of the Company.
"Company" means Allied Healthcare Products, Inc., a Delaware
corporation.
"Convertible Securities" means evidence of indebtedness, shares of
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Current Market Price" of a share of Common Stock or of any other
security as of a relevant date means: (i) the Fair Value thereof as
determined in accordance with clause (ii) of the definition of Fair Value
with respect to Common Stock or any other security that is not listed on a
national securities exchange or traded on the over-the-counter market or
quoted on NASDAQ, and (ii) the average of the daily closing prices for the
ten (10) trading days before such date (excluding any trades which are not
bona fide arm's length transactions) with respect to Common Stock or any
other security that is listed on a national securities exchange or traded on
the over-the-counter market or quoted on NASDAQ. The closing price for each
day shall be (i) the last sale price of shares of Common Stock or such other
security, regular way, on such date or, if no such sale takes place on such
date, the average of the closing bid and asked prices thereof on such date,
in each case as officially reported on the principal national securities
exchange on which the same are then listed or admitted to trading, or (ii) if
no shares of Common Stock or if no securities of the same class as such other
security are then listed or admitted to trading on any national securities
exchange, the average of the reported closing bid and asked prices thereof on
such date in the over-the-counter market as shown by the National Association
of Securities Dealers automated quotation system or, if no shares of Common
Stock or if no securities of the same class as such other security are then
quoted in such system, as published by the National Quotation Bureau,
Incorporated or any similar successor organization, and in either case as
reported by any member firm of the New York Stock Exchange selected by the
Warrantholders.
"Exchange Act" means the Securities Act of 1934.
2
"Exercise Period" means the period commencing on August 7, 1998 and
ending at 12:00 midnight California local time on the Expiration Date.
"Exercise Price" means initially Seven and 025/1000 Dollars ($7.025)
per share, subject to adjustment as provided in this Warrant.
"Expiration Date" means August 7, 2002.
"Fair Value" means: (i) with respect to a share of Common Stock or any
other security, the Current Market Price thereof, and (ii) with respect to
any other property, assets, business or entity, an amount determined in
accordance with the following procedure: the Company and the holders of the
Warrants and Warrant Shares, as applicable, shall use their best efforts to
mutually agree to a determination of Fair Value within ten (10) days of the
date of the event requiring that such a determination be made. If the
Company and such holders are unable to reach agreement within said ten (10)
day period, the Company and such holders shall within ten (10) days of the
expiration of the ten (10) day period referred to above each retain a
separate independent investment banking firm (which firm shall not be the
investment banking firm regularly retained by the Company). If either the
Company or such holders fails to retain such an investment banking firm
during such period, then the independent investment banking firm retained by
such holders or the Company, as the case may be, acting along, shall take the
actions outlined below. Such firms shall determine (within thirty (30) days
of their being retained) the Fair Value of the security, property, assets,
business or entity, as the case may be, in question and deliver their opinion
in writing to the Company and to such holders. If such firms cannot jointly
make the determination, then, unless otherwise directed by agreement of the
Company and such holders, such firms, in their sole discretion, shall choose
another investment banking firm independent of the Company and such holders,
which firm shall make the determination and render an opinion as promptly as
practicable. In either case, the determination so made shall be conclusive
and binding on the Company and such holders. The fees and expenses of any
such determination made by any and all such independent investment banking
firms shall be paid by the Company. If there is more than one holder of
Warrants, and/or Warrant Shares entitled to a determination of Fair Value in
any particular instance, each action to be taken by the holders of such
Warrants and/or Warrant Shares under this Section shall be taken by a
majority in interest of such holders and the action taken by such majority
(including as to any mutual agreement with the Company with respect to Fair
Value and as to any selection of investment banking firms) shall be binding
upon all such holders. In the case of a determination of the Fair Value per
share of Common Stock, the Company and such holders shall not take into
consideration, and shall instruct all such investment banking firms not to
take into consideration, any premium for shares representing control of the
Company, any discount for any minority interest therein or any restrictions
on transfer under applicable federal and state securities laws or otherwise.
"Foothill" means Foothill Capital Corporation, a California corporation.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 11(e)(iii).
3
"Loan Agreement" means that certain Loan and Security Agreement of even
date herewith among the Company, its subsidiaries named therein and Foothill.
"Registrable Stock" means: (i) all Warrant Shares which are issuable
to the Warrantholders pursuant to the Warrants, whether or not the Warrants
have in fact been exercised and whether or not such Warrant Shares have in
fact been issued, (ii) all Warrant Shares acquired by the Warrantholders
pursuant to the Warrants, (iii) any shares of Common Stock, whether or not
such shares of Common Stock have in fact been issued, and stock or other
securities of the Company issued upon conversion of, in a stock split or
reclassification of, or a stock dividend or other distribution on, or in
substitution or exchange for, or otherwise in connection with, such Warrant
Shares. For purposes of Section 11, a Warrantholder of record shall be
treated as the record holder of the related Warrant Shares and other
securities issuable pursuant to the Warrants.
"Regulated Warrantholder" means any Warrantholder which is, or the part
of which is, subject to the Bank Holding Company Act, or any successor
statute, or any other federal or state banking laws and regulations.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant(s)" means this Warrant and any warrants issued in exchange or
replacement of this Warrant or upon transfer hereof.
"Warrantholder(s)" means Woodbourne and its successors and assigns.
"Warrant Share" means shares of Common Stock issuable to Warrantholders
pursuant to the Warrants.
2. EXERCISE OF WARRANT. This Warrant may be exercised, in whole or
in part, at any time and from time to time during the Exercise Period by
written notice to the Company and upon payment to the Company of the Exercise
Price (subject to adjustment as provided herein) for the shares of Common
Stock in respect of which the Warrant is exercised.
3. FORM OF PAYMENT OF EXERCISE PRICE. Anything contained herein to
the contrary notwithstanding, at the option of the Warrantholders, the
Exercise Price may be paid in any one or a combination of the following
forms: (a) by wire transfer to the Company, (b) by the Warrantholder's check
to the Company, (c) by the cancellation of any indebtedness owed by the
Company and/or any subsidiaries of the Company to the Warrantholder, and/or
(d) by the surrender to the Company of Warrants, Warrant Shares, Common Stock
and/or other securities of the Company and/or any subsidiaries of the Company
having a Fair Value equal to the Exercise Price.
4
4. CASHLESS EXERCISE/CONVERSION; APPRECIATION RIGHTS.
(a) Cashless Exercise/Conversion. In lieu of exercising this
Warrant as specified in Sections 2 and 3 above, the Warrantholders may from
time to time at the Warrantholders' option convert this Warrant, in whole or
in part, into a number of shares of Common Stock of the Company determined by
dividing (A) the aggregate Fair Value of such shares or other securities
otherwise issuable upon exercise of this Warrant minus the aggregate Exercise
Price of such shares by (B) the Fair Value of one such share.
(b) Appreciation Right. At any time on or after August 7,
2000, in lieu of exercising this Warrant as specified in Sections 2 and 3
above, the Warrantholders may from time to time at the Warrantholders' option
require the Company to purchase this Warrant or any portion hereof, for cash,
at a price equal to the then Fair Value of the Common Stock issuable upon
exercise of this Warrant less the Exercise Price. Upon the Warrantholders'
exercise of this option, the Company shall promptly wire transfer to the
Warrantholders such amount in immediately available funds as is required
under this Section 4(b), but in no event later than five (5) business days
after the exercise of such option, in immediately available funds.
5. CERTIFICATES FOR WARRANT SHARES; NEW WARRANT. The Company agrees
that the Warrant Shares shall be deemed to have been issued to the
Warrantholders as the record owner of such Warrant Shares as of the close of
business on the date on which payment for such Warrant Shares has been made
(or deemed to be made by conversion) in accordance with the terms of this
Warrant. Certificates for the Warrant Shares shall be delivered to the
Warrantholders within a reasonable time, not exceeding five (5) days, after
this Warrant has been exercised or converted. A new Warrant representing the
number of shares, if any, with respect to which this Warrant remains
exercisable also shall be issued to the Warrantholders within such time so
long as this Warrant has been surrendered to the Company at the time of
exercise.
6. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES AND NATURE OF
SECURITIES ISSUABLE UPON EXERCISE OF WARRANTS.
(a) Exercise Price; Adjustment of Number of Shares. The
Exercise Price shall be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the Exercise Price, the
Warrantholders shall thereafter be entitled to purchase, at the Exercise
Price resulting from such adjustment, a number of shares determined by
multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior t such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(b) Adjustment of Exercise Price Upon Issuance of Common
Stock. If and whenever after the date hereof the Company shall issue or sell
Additional Shares of Common Stock without consideration or for a
consideration per share less than the Current Market Price or the Exercise
Price then in effect immediately prior to the issuance or sale of such
shares, then the Exercise
5
Price in effect immediately prior to such issuance or sale of such shares
shall be reduced to a number which shall be calculated by dividing (A) an
amount equal to the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Exercise Price plus (2) the aggregate consideration, if any,
received by the Company upon such issue or sale, by (B) the total number of
shares of Common Stock outstanding immediately after such issue or sale.
No adjustment of the Exercise Price, however, shall be made in an
amount less than $.01 per share, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried
forward, shall amount to $.01 per share or more.
The provisions of this Section 6(b) shall not apply to (i) any
Additional Shares of Common Stock which are distributed to holders of Common
Stock pursuant to a stock split for which an adjustment is provided for under
Section 6(f), or (ii) any additional shares of Common Stock which are issued
upon exercise of options to purchase Common Stock outstanding as of the date
of issuance of this Warrant.
(c) Further Provisions for Adjustment of Exercise Price Upon
Issuance of Additional Shares of Common Stock and Convertible Securities.
For purposes of Section 6(b), the following provisions shall also be
applicable:
(i) in case at any time on or after the date hereof, the
Company shall declare any dividend, or authorize any other distribution, upon
any stock of the Company of any class, payable in Additional Shares of Common
Stock or by the issuance of Convertible Securities, such declaration or
distribution shall be deemed to have been issued or sold (as of the record
date) without consideration and shall thereby cause an adjustment in the
Exercise Price as required by Section 6(b).
(ii) (A) In case at any time on or after the date
hereof, the Company shall in any manner issue or sell any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, there shall be determined the price per share for
which Additional Shares of Common Stock are issuable upon the conversion or
exchange thereof, such determination to be made by dividing (a) the total
amount received or receivable by the Company as consideration for the issue
or sale of such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the conversion
or exchange thereof by (b) the maximum aggregate number of Additional Shares
of Common Stock issuable upon conversion or exchange of all such Convertible
Securities for such minimum aggregate amount of additional consideration; and
such issue or sale shall be deemed to be an issue or sale for cash (as of the
date of issue or sale of such Convertible Securities) of such maximum number
of Additional Shares of Common Stock at the price per share so determined,
and shall thereby cause an adjustment in the Exercise Price, if such an
adjustment is required by Section 6(b) hereof.
6
(B) If such Convertible Securities shall by their
terms provide for an increase or increases, withe passage of time, in the
amount of additional consideration, if any, payable to the Company, or in the
rate of exchange upon the conversion or exchange thereof, the adjusted
Exercise Price shall, upon any such increase becoming effective, be increased
to such Exercise Price as would have been in effect had the adjustments made
upon the issuance of such Convertible Securities been made upon the basis of
(and the total consideration received therefor) (a) the issuance of the
number of shares of Common Stock theretofore actually delivered upon the
exercise of such Convertible Securities, (b) the issuance of all Common
Stock, all Convertible Securities and all rights and options to purchase
Common Stock issued after the issuance of such Convertible Securities, and
(c) the original issuance at the time of such change of such Convertible
Securities then still outstanding; provided, however, that any such increase
or increases shall not exceed, in the aggregate, the amount of the original
reduction of the Exercise Price attributable to the Convertible Securities.
(C) If any rights of conversion or exchange
evidenced by such Convertible Securities shall expire without having been
exercised, the adjusted Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been in effect had an adjustment with respect to
such Convertible Securities been made on the basis that the only Additional
shares of Common Stock issued or sold were those issued upon the conversion
or exchange of such Convertible Securities, and that they were issued or sold
for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of such Convertible Securities.
(iii) (A) In case at any time on or after the date
hereof, the Company shall in any manner grant or issue any rights or options
to subscribe for purchase or otherwise acquire Additional Shares of Common
Stock, whether or not such rights or options are immediately exercisable,
there shall be determined the price per share for such Additional Shares of
Common Stock are issuable upon the exercise of such rights or options, such
determination to be made by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting of such rights
or options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of such rights or options if
the maximum number of Additional Shares were issued pursuant to such rights
or options for such minimum aggregate amount of additional consideration, by
(b) the maximum number of Additional Shares of Common Stock of the Company
issuable upon the exercise of all such rights or options for such minimum
aggregate amount of additional consideration; and the granting of such rights
or options shall be deemed to be an issue or sale for cash (as of the date of
the granting of such rights or options) of such maximum number of Additional
Shares of Common Stock at the price per share so determined, and shall
thereby cause an adjustment in the Exercise Price, if such an adjustment is
required by Section 6(b) hereof.
(B) If such rights or options shall by their terms
provide for an increase or increases, with passage of time, in the amount of
additional consideration payable to the Company upon the exercise thereof,
the adjusted Exercise Price shall, upon any such increases
7
becoming effective, be increased to such Exercise Price as would have been in
effect had the adjustments made upon the issuance of such rights or options
been made upon the basis of (and the total consideration received therefor)
(a) the issuance of the number of shares of Common Stock theretofore actually
delivered upon the exercise of such rights or options, (b) the issuance of
all Common Stock, all rights and options and all Convertible Securities
issued after the issuance of such rights and options, and (c) the original
issuance at the time of such change of any such rights or options then still
outstanding; provided, however, that any such increase or increases in the
Exercise Price shall not exceed, in the aggregate, the amount of the original
reduction of the Exercise Price attributable to the grant of such rights or
options.
(C) If any such rights or options shall expire
without having been exercised, the adjusted Exercise Price shall forthwith be
readjusted to such Exercise Price as xxxx have been in effect had an
adjustment with respect to such rights or options been made on the basis that
the only Additional Shares of Common Stock so issued or sold were those
issued or sold upon the exercise of such rights or options and that they were
issued or sold for the consideration actually received by the Company upon
such exercise, plus the consideration, if any, actually received by the
Company for the granting of such rights or options.
(iv) (A) In case at any time on or after the date
hereof, the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Convertible Securities, there shall be
determined the price per share for which Additional Shares of Common Stock
are issuable upon the exchange or conversion of such Convertible Securities
if such rights or options were exercised, such determination to be made by
dividing (a) the total amount, if any, received or receivable by the Company
as consideration for the issuance of such rights or options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options if the maximum number of
Convertible Securities were issued pursuant to such rights or options for
such minimum aggregate amount of additional consideration, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exchange or conversion of such Convertible Securities if the maximum
number of Additional Shares were issued pursuant to such Convertible
Securities for such minimum aggregate amount of additional consideration, by
(b) the maximum aggregate number of Additional Shares of Common Stock
issuable upon the exchange or conversion of the Convertible Securities for
such minimum aggregate amount of additional consideration; and the issue or
sale of such rights or options shall be deemed to be an issue or sale for
cash (as of the date of the granting of such rights or options) of such
minimum number of Additional Shares of Common Stock at the price per share so
determined, and thereby shall cause an adjustment in the Exercise Price, if
such an adjustment is required by Section 6(b).
(B) If such rights or options to subscribe for or
otherwise acquire Convertible Securities shall by their terms provide for an
increase or increases, with the passage of time, in the amount of additional
consideration payable to the Company upon the exercise, exchange or
conversion thereof, the adjusted Exercise Price shall, forthwith upon any
such increase becoming effective, be increased to such Exercise Price as
would have been in effect had the adjustments made
8
upon the issuances of such rights or options been made upon the basis of (and
the total consideration received therefor) (a) the issuance of the number of
shares of Common Stock therefore actually delivered upon the exchange or
conversion of such Convertible Securities, (b) the issuances of all Common
Stock and all rights, options and Convertible Securities issued after the
issuance of such rights and options and (c) the original issuances at the
time of such change of any such rights, options and Convertible Securities
issued upon exercise of such rights or options which are then still
outstanding; provided, however, that any such increase or increases shall not
exceed, in the aggregate, the amount of the original reduction of the
Exercise Price attributable to the grant of such rights or options.
(C) If any such rights, options or rights of
conversion or exchange of such convertible Securities shall expire without
having been exercised, exchanged or converted, the adjusted Exercise Price
shall forthwith be readjusted to such Exercise Price as would have been in
effect had an adjustment been made with respect to such rights, options or
rights of conversion or exchange of such Convertible Securities on the basis
that the only Additional Shares of Common Stock so issued or sold were those
issued or sold upon the exercise of such rights or options and exchange or
conversion of such Convertible Securities and that they were issued or sold
for the consideration actually received by the Company upon exercise of such
rights and options and exchange or conversion of such Convertible Securities,
plus the consideration if any, actually received by the Company for the
granting of such rights, options or Convertible Securities.
(v) In any case where an adjustment has been made in the
Exercise Price upon the issuance of Convertible Securities or any rights or
options to purchase Convertible Securities or Additional Shares of Common
Stock pursuant to this Section 6(c), no further adjustment shall be made at
the time of the conversion of any such Convertible Securities or at the time
of the exercise of any such rights or options.
(vi) In case at any time on or after the issuance of this
Warrant any shares of Common Stock or Convertible Securities shall be issued
or sold for a consideration other than cash, the amount of the consideration
other than cash payable to the company shall be deemed to be the Fair Value
of such consideration. Whether or not the consideration so received is cash,
the amount thereof shall be determined after deducting therefrom any expenses
incurred or any underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
(vii) In case at any time the company shall fix a record
date of the holders of its Common Stock for the purpose of entitling them (a)
to receive a dividend or other distribution payable in Common Stock,
Convertible Securities or rights or options to purchase either thereof, or
(b) to subscribe for or purchase Common Stock, Convertible Securities or
rights or options to purchase either thereof, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed, pursuant to this Section 6(c), to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case
may be.
9
(viii) The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purposes of this
Section 6(c).
(d) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock
shall be entitled to receive cash, stock, securities or assets with respect
to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provisions shall be made whereby the Warrantholders shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Warrant upon exercise of this Warrant and in
lieu of the shares of the Common Stock of the Company immediately therefore
purchasable and receivable upon the exercise of the rights represented
hereby, such cash, shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
Common Stock equal to the number of shares of such Common Stock immediately
therefore purchasable and receivable upon the exercise of the rights
represented hereby, and in any such case appropriate provision shall be made
with respect to the rights and interest of the Warrantholders to the end that
the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company shall not
effect any consolidation, merger or sale of all or substantially all of the
assets of the Company unless prior to or simultaneous with the consummation
thereof the successor corporation (if other than the Company) resulting from
such consolidation, merger or purchase of such assets shall assume, by
written instrument executed and mailed or delivered to the Warrantholders,
the obligation to deliver to such Warrantholders such cash (or cash
equivalent), shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Warrantholders may be entitled to receive and
containing the express assumption of such successor corporation of the due
and punctual performance and observance of each provision of this Warrant to
be performed and observed by the Company and of all liabilities and
obligations of the Company hereunder; provided, however, in the case of any
consolidation or merger of the Company with another corporation or the sale
of all or substantially all of its assets to another corporation effected in
such a manner that the holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, at the election of each Warrantholder, in lieu of receiving such stock,
securities or assets, such Warrantholder shall receive cash equal to the Fair
Value of the Common Stock issuable upon exercise of the Warrant, less the
Exercise Price payable upon exercise thereof.
In case any Additional Shares of Common Stock or
Convertible Securities or any rights or options to purchase any Additional
Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger of another corporation into the Company, the
amount of consideration therefor shall be deemed to be the Fair Value of such
portion of the assets of such
10
merged corporation as the Board of Directors of the Company shall in good
faith determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities or rights or options, as the case may be, and the
Exercise Price shall be adjusted in accordance with this Section 6(d).
(e) Company to Prevent Dilution. In case at any time or from
time to time conditions arise by reason of action taken by the Company which
are not adequately covered by the provisions of this Section 6, and which
might materially and adversely affect the exercise rights of the
Warrantholders under any provision of this Warrant, unless the adjustment
necessary shall be agreed upon by the Company and the Warrantholders, the
Board of Directors of the Company shall appoint a firm of independent
certified public accountants of recognized national standing (who have not
been employed by the Company within the last five years), acceptable to the
Warrantholders, what the Company's expense shall give their opinion upon the
adjustment, if any, on a basis consistent with the standards established in
the other provisions of this Section 6, necessary with respect to the
Exercise Price and the number of shares purchasable upon exercise of the
Warrants, so as to preserve, without dilution, the exercise rights of the
Warrantholders. Upon receipt of such opinion, such Board of Directors shall
forthwith make the adjustments described therein.
(f) Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of
Common Stock purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in case at
any time the Company shall combine its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect immediately
prior to such combination shall be proportionately increased and the number
of shares of Common Stock purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced.
(g) Dissolution, Liquidation and Winding-Up. In case the
Company shall, at any time prior to the expiration of this Warrant, dissolve,
liquidate or wind up its affairs, the Warrantholders shall be entitled, upon
the exercise of this Warrant, to receive, in lieu of the shares of Common
Stock of the Company which such Warrantholders would have been entitled to
receive, the same kind and amount of assets as would have been issued,
distributed or paid to such Warrantholders upon any such dissolution,
liquidation or winding up with respect to such shares of Common Stock of the
Company, had such Warrantholders been the holders of record of the Warrant
Shares receivable upon the exercise of this Warrant on the record date for
the determination of those persons entitled to receive any such liquidating
distribution. After any such dissolution, liquidation or winding up which
shall result in any cash distribution in excess of the Exercise Price
provided for by this Warrant, the Warrantholders may, at each such
Warrantholder's option, exercise the same without making payment of the
Exercise Price, and in such case the Company shall, upon the distribution to
said Warrantholders, consider that said Exercise Price has been paid in full
to it and in making settlement to said Warrantholders, shall deduct from the
amount payable to such Warrantholders an amount equal to such Exercise Price.
11
(h) Noncash Consideration. In case any Additional Shares of
Common Stock or Convertible Securities or any rights or options to purchase
any Additional Shares of Common Stock or Convertible Securities shall be
issued for a consideration in a form other than cash, the amount of such
consideration shall be deemed to be the Fair Value thereof.
(i) Accountants' Certificate. In each case of an adjustment in
the number of shares of Common Stock or other stock, securities or property
receivable on the exercise of the Warrants, the Company at its expense shall
cause independent public accountants of recognized standing selected by the
Company and acceptable to the Warrantholders to compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such
adjustment is based, including a statement of (a) the consideration received
or to be received by the Company for any Additional Shares of Common Stock,
rights, options or Convertible Securities issued or sold or deemed to have
been issued or sold, (b) the number of shares of Common Stock of each class
outstanding or deemed to be outstanding, (c) the adjusted Exercise Price and
(d) the number of shares issuable upon exercise of this Warrant. The Company
will forthwith mail a copy of each such certificate to each Warrantholder.
7. SPECIAL AGREEMENTS OF THE COMPANY.
(a) Reservation of Shares. The Company covenants and agrees
that all Warrant Shares will, upon issuance, be validly issued, fully paid
and nonassessable and free from all preemptive rights of any stockholder and
from all taxes, liens and charges with respect to the issue thereof. The
Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
The Company hereby covenants and agrees to take all such action as may be
necessary to assure that the par value per share of the Common Stock is at
all times equal to or less than the Exercise Price.
(b) Avoidance of Certain Actions. The Company will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding
the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in
carrying out all of the provisions of this Warrant and in taking all of such
action as may be necessary or appropriate in order to protect the rights of
the Warrantholders against dilution or other impairment of their rights
hereunder.
(c) Securing Governmental Approvals. If any shares of Common
Stock required to be reserved for the purposes of exercise of this Warrant
require registration with or approval of any governmental authority under any
federal law (other than the Securities Act) or under any state law before
such shares may be issued upon exercise of this Warrant, the Company will, at
its expense, as expeditiously as possible, cause such shares to be duly
registered or approved, as the case may be.
12
(d) Listing on Securities Exchanges; Registration. If, and so
long as, any class of the Company's Common Stock shall be listed on any
national securities exchange (as defined in the Exchange Act), the Company
will, at its expense, obtain and maintain the approval for listing upon
official notice of issuance of all Warrant Shares and maintain the listing of
Warrant Shares after their issuance; and the Company will so list on such
national securities exchange, will register under the Exchange Act (or any
similar statute then in effect), and will maintain such listing of, any other
securities that at any time are issuable upon exercise of this Warrant if and
at the time any securities of the same class shall be listed on such national
securities exchange by the Company.
(e) Information Rights. So long as the Warrantholders hold
this Warrant and/or any of the Warrant Shares, the Company shall deliver to
the Warrantholders (i) promptly after mailing, copies of all communications
to the shareholders of the Company, (ii) within ninety (90) days after the
end of each fiscal year of the Company, the annual audited financial
statements of the Company certified by the independent public accountants of
recognized standing, and (iii) within forty-five (45) days after the end of
each of the first three quarters of each fiscal year, the Company's
quarterly, unaudited financial statements.
(f) Restrictions on Public Sale by the Company. In the event
of an underwritten offering by the Company made pursuant to a registration
statement filed pursuant to Sections 11(a) or 11(b) the Company will not
effect any public or private sale or distribution of its convertible debt or
equity securities, including a sale under Regulation D of the Securities Act,
for such period of time (not to exceed 90 days) as may be requested by the
underwriters subject to customary exceptions; and the Company shall cause
each holder of its privately placed convertible debt or equity securities
issued by it at any time on or after the date of this Warrant to agree not to
effect any public sale or distribution of any such securities during such
period, including a sale pursuant to Rule 144 or Rule 144A under the
Securities Act.
(g) Preemptive Rights. In the event the Company offers to the
Company's shareholders the right to purchase any securities of the Company,
then all shares of Common Stock issuable pursuant to the Warrants shall be
deemed to be issued and outstanding and held by the Warrantholders and the
Warrantholders shall be entitled to participate in such rights offering.
(h) Compliance with Law. The Company shall comply with all
applicable laws, rules and regulations of the Untied States and of all
states, municipalities and agencies and of any other jurisdiction applicable
to the Company and shall do all things necessary to preserve, renew and keep
in full force and effect and in good standing its corporate existence and
authority necessary to continue its business.
8. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon exercise hereof, the
Company shall pay to the Warrantholder an amount in cash equal to such
fraction multiplied by the Current Market Value of one share of Common Stock.
13
9. NOTICES OF STOCK DIVIDENDS, SUBSCRIPTIONS, RECLASSIFICATIONS,
CONSOLIDATIONS, MERGERS, ETC. If at any time: (i) the Company shall declare
a cash dividend (or an increase in the then existing dividend rate), or
declare a dividend on Common Stock payable otherwise than in cash out of its
net earnings after taxes for the prior fiscal year; or (ii) the Company shall
authorize the granting to the holders of Common Stock of rights to subscribe
for or purchase any shares of capital stock of any class or of any other
rights; or (iii) there shall be any capital reorganization, or
reclassification, or redemption of the capital stock of the Company, or
consolidation or merger of the Company with or sale of all or substantially
all of its assets to, another corporation or firm; or (iv) there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
Company, then the Company shall give to the Warrantholders at the addresses
of such Warrantholders as shown on the books of the Company, at least twenty
(20) days prior to the applicable record date hereinafter specified, a
written notice summarizing such action or event and stating the record date
for any such dividend or rights (or, if a record date is not to be selected,
the date as of which the holders of Common Stock of record entitled to such
dividend or rights are to be determined), the date on which any such
reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up is expected to become effective, and
the date as of which it is expected the holders of Common Stock of record
shall be entitled to effect any exchange of their shares of Common Stock for
cash (or cash equivalent), securities or other property deliverable upon any
such reorganization, reclassification, consolidation, merger, sale of assets,
dissolution, liquidation or winding up.
10. REGISTERED HOLDER; TRANSFER OF WARRANTS OR WARRANT SHARES.
(a) Maintenance of Registered books; Ownership of this
Warrant. The Company shall keep at its principal office a register in which
the Company shall provide for the registration, transfer and change of this
Warrant. The Company shall not at any time, except upon the dissolution,
liquidation or winding-up of the Company, close such register so as to result
in preventing or delaying the exercise or transfer of this Warrant.
(b) Exchange and Replacement. This Warrant is exchangeable
upon surrender hereof by the registered holder to the Company at its
principal office for new Warrants of like tenor and date representing in the
aggregate the right to purchase the number of shares purchasable hereunder,
each of such new Warrants to represent the right to purchase such number of
shares as shall be designated by said registered holder at the time of
surrender. This Warrant and all rights hereunder are transferable in whole
or in part upon the books of the Company by the registered holder hereof in
person or by duly authorized attorney, and new Warrants shall be made and
delivered by the Company, of the same tenor and date as this Warrant bu
registered in the name of the transferee(s) upon surrender of this Warrant,
duly endorsed, to said office of the Company. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant, without requiring the posting of any
bond or the giving of any other security. This Warrant shall be promptly
canceled by the Company upon the surrender hereof in connection with any
exchange, transfer or replacement.
14
The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of Warrants pursuant
to this Section 10.
(c) Warrants and Warrant Shares Not Registered. The holder of
this Warrant, by accepting this Warrant, represents and acknowledges that
this Warrant and the Warrant Shares are not being registered under the
Securities Act on the grounds that the issuance of this Warrant and the
offering and sale of such Warrant Shares are exempt from registration under
Section 4(2) of the Securities Act as not involving any public offering.
11. REGISTRATION.
(a) Required Registration. Whenever the Company shall receive
a written request therefor from any holder or holders of at least 50% of the
Registrable Stock, the Company shall promptly prepare and file a registration
statement under the Securities Act covering the Registrable Stock which is
the subject of such request and shall use its best efforts to cause such
registration statement to become effective as expeditiously as possible;
provided that the Company's obligations under this Section 11(a) shall be
limited to one required registration only. Upon the receipt of such request,
the Company shall promptly give written notice to all holders of Registrable
Stock that such registration is to be effected. The Company shall include in
such registration statement such Registrable Stock for which it has received
written requests to register such shares by the holders thereof within thirty
(30) days after the effectiveness of the Company's written notice to such
other holders. Except as hereinafter expressly provided, without the written
consent of the holders of a majority of the shares of Registrable Stock for
which registration has been requested pursuant to this Section, neither the
Company nor any other holder of securities of the Company may include
securities in such registration.
(b) Incidental Registration. Each time the Company shall
determine to file a registration statement under the Securities Act (other
than on From S-8 or Form S-4) in connection with the proposed offer and sale
for money of any of its securities by it or by any of its securities holders,
the company will give written notice of its determination to all holders of
Registrable Stock. Upon written request of a holder of any Registrable
Stock, the Company will cause all such Registrable Stock, the holders of
which have so requested registration thereof, to be included in such
registration statement, all to the extent requisite to permit the sale or
other disposition by the prospective seller or sellers of the Registrable
Stock to be so registered in accordance with the terms of the proposed
offering. If the registration statement is to cover an underwritten
distribution, the Company shall use its best efforts to cause the Registrable
Stock requested for inclusion pursuant to this Section 11(b) to be included
in the underwriting on the same terms and conditions as the securities
otherwise being sold through the underwriters. If, in the good faith
judgment of the managing underwriter of such public offering, the inclusion
of all the Registrable Stock requested to be registered would materially and
adversely affect the successful marketing of the other shares proposed to be
offered, then the amount of the Registrable Stock to be included in the
offering shall be reduced and the Registrable Stock and the other shares to
be offered shall participate in such offering as follows: the shares to be
sold by the company, the Registrable Stock to be included in
15
such offering and the other shares of Common Stock to be included in such
offering shall each be reduced pr rata in proportion to the number of shares
of Common Stock proposed to be included in such offering by each holder of
such shares and by the Company.
(c) Registration Procedures. If and whenever the Company is
required by the provisions of Section 11(a) or 11(b) to effect the
registration of Registrable Stock under the Securities Act, the Company will,
at its expense, expeditiously as possible:
(i) In accordance with the Securities Act and the rules
and regulations of the Commission, prepare and file with the Commission a
registration statement on the form of registration statement appropriate with
respect to such securities and use its best efforts to cause such
registration statement to become and remain effective until the securities
covered by such registration statement have been sold, and prepare and file
with the Commission such amendments to such registration statement and
supplements to the prospectus contained therein as may be necessary to keep
such registration statement effective and such registration statement and
prospectus accurate and complete until the securities covered by such
registration statement have been sold;
(ii) If the offering is to be underwritten, in whole or in
part, enter into a written underwriting agreement with the holders of the
Registrable Stock participating in such offering and the underwriter in form
and substance reasonably satisfactory to the managing underwriter of the
public offering and the holders of the Registrable Stock participating in
such offering;
(iii) Furnish to the holders of securities participating in
such registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus and such other documents as such underwriters and holders may
reasonably request in order to facilitate the public offering of such
securities;
(iv) Use its best efforts to register or qualify the
securities covered by such registration statement under such state securities
or blue sky laws of such jurisdictions as such participating holders and
underwriters may reasonably request.
(v) Notify the holders participating in such
registration, promptly after it shall receive notice thereof, of the date and
time when such registration statement and each post-effective amendment
thereto has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(vi) Notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration statement
or prospectus or for additional information;
(vii) Prepare and file with the Commission, promptly upon
the request of any such holders, any amendments or supplements to such
registration statement or prospectus
16
which, in the opinion of counsel for such holders, is required under the
Securities Act or the rules and regulations thereunder in connection with the
distribution or the Registrable Stock by such holders;
(viii) Prepare and promptly file with the Commission,
and promptly notify such holders of the filing of, such amendments or
supplements to such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities
Act, any event has occurred as the result of which any such prospectus or any
other prospectus is then in effect may include an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(ix) In case any of such holders or any underwriter for
any such holders is required to deliver a prospectus at a time when the
prospectus then in circulation is not in compliance with the Securities Act
or the rules and regulations of the Commission, prepare promptly upon request
such amendments or supplements to such registration statement and such
prospectus as may be necessary in order for such prospectus to comply with
the requirements of the Securities Act and such rules and regulations;
(x) Advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(xi) If requested by the managing underwriter or
underwriters or a holder of Registrable Stock being sold in connection with
an underwritten offering, immediately incorporate in a prospectus supplement
or post-effective amendment such information as the managing underwriters and
the holders of a majority of the Registrable Stock being sold agree should be
included therein relating to the plan of distribution with respect to such
Registrable Stock, including information with respect to the Registrable
Stock being sold to such underwriters, the purchase price being paid for by
such underwriters and with respect to any other terms of the underwritten (or
best efforts underwritten) offering of the Registrable Stock to be sold in
such offering; and make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(xii) Cooperate with the selling holders of Registrable
Stock and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Stock to be
sold and not bearing any restrictive legends; and enable such Registrable
Stock to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to any
sale of Registrable Securities to the underwriters;
17
(xiii) Prepare a prospectus supplement or
post-effective amendment to the registration statement or the related
prospectus or any document incorporated therein by reference or file any
other required documents so that, as thereafter delivered to the purchasers
of the Registrable Stock, the prospectus will not contain an untrue statement
of material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xiv) Enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of such Registrable Securities and
in such connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration:
(A) make such representations and warranties to the
holders of such Registrable Stock and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings;
(B) If an underwriting agreement is entered into,
the same shall set forth in full the indemnification provisions and
procedures of Section 11(e) hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) The Company shall deliver such documents and
certificates as may be requested by the holders of the majority of the
Registrable Stock being sold and the managing underwriters, if any, to
evidence compliance with the terms of this Section 11(c) and with any
customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
The above shall be done at each closing under
such underwriting or similar agreement or as and to the extend required
thereunder;
(xv) Make available for inspection by a representative of
the holders of a majority of the Registrable Stock, any underwriter
participating in any disposition pursuant to a registration statement, and
any attorney or accountant retained by the sellers or underwriter, all
financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such representative,
underwriter, attorney or accountant in connection with the preparation of the
registration statement; provided, that any records, information or documents
that are designated by the Company in writing as confidential shall be kept
confidential by such persons unless disclosure of such records, information
or documents is required by court or administrative order;
(xvi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to the Company's security holders, earning statements satisfying
the provisions of Section 11(a) of the Securities Act, no later than
forty-five (45) days after the end of any twelve (12) month period (or ninety
(90) days, if such a period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Stock is sold to
18
underwriters in an underwritten offering, or, if not sold to underwriters in
such an offering, (ii) beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the registration
statement;
(xvii) Not file any amendment or supplement to such
registration statement or prospectus to which a majority in interest of such
holders has objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, after having been furnished with
a copy thereof at least five (5) business days prior to the filing thereof;
provided, however, that the failure of such holders or their counsel to
review or object to any amendment or supplement to such registration
statement or prospectus shall not affect the rights of such holders or any
controlling person or persons thereof or any underwriter or underwriters
therefor under Section 11(e) hereof; and
(xviii) At the request of any such holder (i) furnish
to such holder on the effective date of the registration statement or, if
such registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement; an opinion, dated such date, of
the counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holder or holders making
such request, covering such matters with respect to the registration
statement, the prospectus and each amendment or supplement thereto,
proceedings under state and federal securities laws, other matters relating
to the Company, the securities being registered and the offer and sale of
such securities as are customarily the subject of opinions of issuer's
counsel provided to underwriters in underwritten public offerings, and such
opinion of counsel shall additionally cover such legal and factual matters
with respect to the registration as such requesting holder or holders may
reasonably request, and (ii) use its best efforts to furnish to such holder
letters dated each such effective date and such closing date, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the holder or holders making such request,
stating that they are independent certified public accountants within the
meaning of the Securities Act and dealing with such matters as the
underwriters may request, or, if the offering is not underwritten, that in
the opinion of such accountants the financial statements and other financial
data of the Company included in the registration statement or the prospectus
or any amendment or supplement thereto comply in all material respects with
the applicable accounting requirements of the Securities Act, and
additionally covering such other financial matters, including information as
to the period ending immediately prior to the date of such letter with
respect to the registration statement and prospectus, as such requesting
holder or holders may reasonably request.
(d) Expenses of Registration. All expenses incident to the
Company's performance of or compliance with this Warrant, including, without
limitation, the following shall be borne by the Company, regardless of
whether the registration statement becomes effective:
(i) All registration and filing fees (including those
with respect to filings required to be made with the National Association of
Securities Dealers, Inc.);
19
(ii) Fees and expenses of compliance with all securities
or blue sky laws (including fees and disbursements of counsel for the
underwriters or selling holders in connection with blue sky qualifications of
the Registrable Stock and in determination of their eligibility for
investment under the laws of such jurisdictions as the managing underwriters
or holders of a majority of the Registrable Stock being sold may designate);
(iii) Printing, messenger, telephone and delivery expenses;
(iv) Fees and disbursements of counsel for the Company and
for the sellers of the Registrable Stock as hereinafter provided;
(v) Fees and disbursements of all independent certified
public accountants of the Company (including the expenses of any special
audit and "comfort" letters required by or incident to such performance); and
(vi) Fees and expenses of other persons retained by the
Company.
The Company will, in any event, pay its internal
expenses (including without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the
listing of securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed, rating agency fees
and the fees and expenses of any person, including special experts, retained
by the Company.
In connection with the registration statement
required hereunder, the Company will reimburse the holders of Registrable
Stock being registered pursuant to the registration statement for the
reasonable fees and disbursements of not more than one counsel (or more than
one counsel if conflict exists among such selling holders in the exercise of
the reasonable judgment of counsel for the selling holders and counsel for
the Company) chosen by the holders of a majority of such Registrable Stock.
(e) Indemnification.
(i) The Company hereby agrees to indemnify each of the
holders of Registrable Stock against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, preliminary or final prospectus, or other
document incident to any such registration, qualification or compliance (or
in any related registration statement, notification or the like) or any
omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under
the Securities Act applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and to reimburse the holders of Registrable
Stock (including
20
officers and directors of the same and controlling persons) for any legal and
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action,provided,
however, that the Company will not be liable in any such case to the extent
that any such claim, loss, damage or liability arises out of or is based on
any untrue statement or omission based upon written information furnished to
the Company by the holders of the Registrable Stock in an instrument duly
executed by Warrantholders and stated to be specifically for use therein.
(ii) The holders of the Registrable Stock severally and
not jointly agree to indemnify the Company and its officers and directors and
each person, if any, who controls any thereof within the meaning of Section
15 of the Securities Act and their respective successors against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement of a material fact contained in any
prospectus, offering circular or document incident to any registration,
qualification or compliance relating to securities purchased pursuant to the
Warrants (or in any related registration statement, notification or the like)
or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading and will reimburse the Company and each other person indemnified
pursuant to this subsection (ii) for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that this
subsection (ii) shall apply only if (and only to the extent that) such
statement or omission was made in reliance upon information (including,
without limitation, written negative responses to inquiries) furnished to the
Company by an instrument duly executed by Warrantholders and stated to be
specifically for use in such prospectus, or other document (or related
registration statement, notification or the like) or any amendment or
supplement thereto.
(iii) Each party entitled to indemnification hereunder (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party (as such Indemnifying Party's
expense) to assume the defense of any claim or litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense
at such party's expense, and provided, further, that the omission by any
Indemnified Party of its obligations under this Section 11(e) expect to the
extent that the omission results in a failure of actual notice to the
Indemnifying Party and such Indemnifying Party is materially damaged solely
as a result of the failure to give notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to the 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.
(iv) If the indemnification provided for in this Section
11(e) is unavailable or insufficient to hold harmless an Indemnified Party in
respect of any losses, claims, damages, liabilities, expenses or actions in
respect thereof referred to herein, then the Indemnifying Party shall
21
contribute to the amount paid or payable by such Indemnified Party as a
result of such losses, claims, damages, liabilities, expenses or actions in
such proportion a is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand, and the Indemnified Party on the other,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities, expenses or actions as well as any other
relevant equitable considerations, including the failure to give the notice
required hereunder. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact relates to
information supplied by the Indemnifying Party or the Indemnified Party and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Warrantholders agree that it would not be just and equitable if
contributions pursuant to this Section 11(e) were determined by pro rata
allocation or by any other method of allocation which did not take account of
the equitable considerations referred to above. The amount paid or payable
to an Indemnified Party as a result of the losses, claims, damages,
liabilities, or actions in respect thereof, referred to above, shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the contribution provisions of this Section
11(e), in no event shall the amount contributed by any seller of Registrable
Stock exceed the aggregate net offering proceeds received by such seller from
the sale of Registrable Stock to which such contribution or indemnification
claim relates. No person guilty of fraudulent misrepresentations (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentations.
(v) The indemnification required by this Section 11(e)
shall be made by periodic payments during the course of the investigation or
defense, as and when bills are received or expenses incurred. Anything
contained herein to the contrary notwithstanding, the maximum aggregate
liability of any holder of Registrable Stock under this Section 11(e) shall
not exceed the amount of the net proceeds actually received by such holder
from the sale of its Registrable Stock pursuant to the registration,
qualification, notification or compliance in respect of which such liability
arose.
(f) Reporting Requirements Under Exchange Act. The Company
shall maintain the registration of its Common Stock under Section 12 of the
Exchange Act and shall keep effective such registration and shall timely file
such information, documents and reports as the Commission may require or
prescribe under Section 13 of the Exchange Act, or otherwise. The Company
under the Securities Act, the Company shall (whether or not it shall then be
required to do so) timely file such information, documents and reports as the
Commission may require or prescribe under Section 13 or 15(d) (whichever is
applicable) of the Exchange Act. The Company shall forthwith upon request
furnish any holder of Registrable Stock (i) a written statement by the
Company that it has complied with such reporting requirements; (ii) a copy of
the most recent annual or quarterly report of the Company; and (iii) such
other reports and documents filed by the Company that it has complied with
the Commission as such holder may reasonably request in availing itself of an
exemption for the sale of Registrable Stock without registration under the
Securities Act. The Company acknowledges and agrees that the purpose of the
requirements contained in this Section 11(f) is to enable any such
22
holder to comply with the current public information requirement contained in
Rule 144 (or any other similar exemptive provision). In addition, the
Company shall take such other measures and file such other information,
documents and reports as shall hereafter be required by the Commission as a
condition to the availability of Rule 144 and Rule 144A under the Securities
Act (or any similar exemptive provision hereafter in effect).
(g) Stockholder Information. The Company may require each
holder of Registrable Stock as to which any registration is to be effected
pursuant to this Section 11 to furnish the Company such information with
respect to such holder and the distribution of such Registrable Stock as
shall be required by law or by the Commission in connection therewith.
12. REPRESENTATION AND WARRANTIES. The Company hereby represents and
warrants to and covenants with Foothill, each Warrantholder, and each holder
of Warrant Shares that:
(a) Organization and Capitalization of the Company. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. As of the date hereof, the
authorized capital of the Company consists of 30,000,000 shares of Common
Stock and 1,500,000 shares of Preferred Stock, of which 7,801,682 shares of
Common Stock and no shares of Preferred Stock are issued and outstanding.
The Company has, and at all times during the Exercise Period will have,
reserved for issuance pursuant to the Warrants that number of shares of
Common Stock that are issuable pursuant to the Warrants. No unissued shares
of Common Stock are reserved for any purpose other than for issuance upon the
exercise of the Warrants. As of the date hereof, the Company has not issued
or agreed to issue any stock purchase rights, options, convertible
securities, warrants (other than this Warrant) or any other securities or
indebtedness convertible into shares of Common Stock, and there are no
preemptive rights in effect with respect to the issuance of any shares of
Common Stock. All the outstanding shares of Common Stock and Preferred Stock
have been validly issued without violation of any preemptive or similar
rights, are fully paid and nonassessable and have been issued in compliance
with all federal and applicable state securities laws.
(b) Authority. The Company has full corporate power and
authority to execute and deliver this Warrant, to issue the shares of Common
Stock issuable upon exercise of this Warrant, and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof has
been duly authorized by all necessary corporate action on its part. This
Warrant has been duly executed on behalf of t he Company and constitutes the
legal, valid and binding obligation of the Company enforceable in accordance
with its terms.
(c) No Legal Bar. Neither the execution, delivery or
performance of this Warrant nor the issuance of the shares of Common Stock
issuable upon exercise of this Warrant will (a) conflict with or result in a
violation of the Certificate of Incorporation or By-Laws of the Company, (b)
conflict with or result in a violation of any law, statue, regulation, order
or decree applicable to the Company or any affiliate, (c) require any consent
or authorization or filing with, or other act by or in respect of any
governmental authority or (d) result in a breach of, constitute a default
under or
23
constitute an event creating rights of acceleration, termination or
cancellation under any mortgage, lease, contract, franchise, instrument or
other agreement to which the Company is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, the shares of Common Stock so issued will
have been validly issued and will be fully paid and nonassessable. On the
date hereof, the par value of the Common Stock is less than the Exercise
Price per share of Common Stock.
13. CONTINUING VALIDITY. Woodbourne and each holder of Warrant
Shares shall continue to be entitled to all rights to which a Warrantholder
is entitled pursuant to the provisions of this Warrant except such rights as
by their terms apply solely to a Warrantholder, notwithstanding the fact that
this Warrant has been exercised or the period of exercisability has expired.
The Company will, at any time upon the request of Woodbourne or a holder of
the Warrant Shares, acknowledge in writing, in form reasonably satisfactory
to Woodbourne or such holder, the Company's continuing obligation to be
entitled in accordance with the provisions of this Warrant; provided,
however, that if Woodbourne or such holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the
Company to afford to Woodbourne and such holder all such rights.
14. REDEMPTION.
(a) This Warrant may be redeemed, at the option of the Company,
at any time after August 7, 2000 until the Expiration Date, for a redemption
price equal to two times the then current Exercise Price, as adjusted as
provided in this Warrant. This Warrant must be redeemed in whole and not in
part if the Company exercises such right of redemption. All rights to
exercise this Warrant shall terminate at 12:00 midnight California local time
on the business day immediately preceding the date fixed for redemption.
(b) In the event the Company shall exercise its right to redeem
this Warrant, it shall give notice to the Warrantholders by mailing a notice
of redemption in accordance with the provisions stated herein, not less than
30 days prior to the redemption date.
(c) The notice of redemption shall specify the redemption
price, the date fixed for redemption, the place where this Warrant shall be
delivered and the redemption price shall be paid, and that the right to
exercise this Warrant shall terminate at 12:00 midnight California local time
on the business day immediately preceding the date fixed for redemption.
(d) Appropriate adjustment shall be made to the redemption
price on the same basis as provided in Section 6 hereof with respect to
adjustment of the Exercise Price.
(e) Effective on the date of the notice of redemption, the
appreciation right set forth in Section 4(b), and all rights of
Warrantholders under such Section 4(b), shall automatically terminate.
24
15. MISCELLANEOUS PROVISIONS.
(a) Notice of Expiration. The Company shall give written
notice to the Warrantholders specifically advising them of the Expiration
Date and of their right to exercise the Warrants not more than one hundred
eighty (180) days and not less than ninety (90) days before the Expiration
Date. If such written notice is not so given, the Expiration Date shall
automatically be extended until ninety (90) days after the date that the
Company gives the Warrantholders such written notice.
(b) Notices. All notices hereunder shall be in writing and
shall be deemed to have been given five (5) days after being mailed by
certified mail, addressed to the address below stated of the party to which
notice is given, or to such changed address as such party may have fixed by
notice:
To the Company: Allied Healthcare Products, Inc.
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Mr. Xxxxx Xxxxx
Fax No.: (000) 000-0000
With copies to: Disckstein, Xxxxxxx, Xxxxx & Oskinsky, LLP
0000 X Xxxxxx XX
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
To the Xxxxxxx Management Company
Warrantholders 000 Xxxxx Xxxxxxxx; Suite 825
or holder of Xx. Xxxxx, Xxxxxxxx 00000
Warrant Shares: Fax No.: (000) 000-0000
With a copy (which Xxxxxxxxxxxx, Xxxxxx & Xxxx, P.C.
shall not constitute 00 Xxxxx Xxxxxxxx; Suite 2000
notice) to: Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax No.: (000) 000-0000
provided, however, that any notice of change of address shall be effective
only upon receipt.
(c) Successors and Assigns. This Warrant shall be binding upon
and inure to the benefit of the Company, Foothill, the Warrantholders and the
holders of Warrant shares and the
25
successors, assigns and transferees of the Company, Woodbourne, the
Warrantholders and the holders of Warrant Shares.
(d) Attorneys' Fees. The Company agrees to pay, on demand, all
attorneys' fees (including attorneys' fees incurred pursuant to proceedings
arising under the Bankruptcy Code) and all other costs and expenses which may
be incurred by Woodbourne, the Warrantholders and the holders of Warrant
Shares in connection with any amendment to this Warrant and/or in connection
with the enforcement of this Warrant or in any way arising out of, or
consequential to the protection, assertion, or enforcement of the Obligations
under the Loan Agreement (or any security therefor), whether or not suit is
brought.
(e) Entire Agreement: Amendments and Waivers. This Warrant
sets forth the entire understanding of the parties with respect to the
transactions contemplated hereby. The failure of any party to seek redress
for the violation or to insist upon the strict performance of any term of
this Warrant shall not constitute a waiver of such term and such party shall
be entitled to enforce such term without regard to such forbearance. This
Warrant may be amended, the Company may take any action herein prohibited or
omit to take action herein required to be performed by it, and any breach of
or compliance with any covenant, agreement, warranty or representation may be
waived, only if the Company has obtained the written consent or written
waiver of the majority in interest of the Warrantholders, and then such
consent or waiver shall be effective only in the specific instance and for
the specific purpose for which given.
(f) Severability. If any term of this Warrant as applied to
any person or to any circumstance is prohibited, void, invalid or
unenforceable in any jurisdiction, such term shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without in any
way affecting any other term of this Warrant or affecting the validity or
enforceability of this Warrant or of such provision in any other jurisdiction.
(g) Headings. The headings in this Warrant are inserted only
for convenience of reference and shall not be used in the construction of any
of its terms.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
26
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officers as of the date first set forth above.
ALLIED HEALTHCARE PRODUCTS, INC.,
a Delaware corporation
/s/ Xxxxx X. Xxxxx
By: __________________________________
Name: Xxxxx X. Xxxxx
Title: Vice President-Finance
27
