EXHIBIT 10.3
THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO HYPERTENSION DIAGNOSTICS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN SUBSCRIPTION AGREEMENT DATED
AS OF MARCH __, 2002 BETWEEN HYPERTENSION DIAGNOSTICS, INC. AND THE HOLDER
HEREOF.
Right to Purchase ______ shares
of Common Stock of Hypertension
Diagnostics, Inc. (subject to
adjustment as provided herein)
COMMON STOCK PURCHASE WARRANT
No. 2002-_ Issue Date: March ____, 2002
HYPERTENSION DIAGNOSTICS, INC., a corporation organized under the laws
of Minnesota (the "Company"), hereby certifies that, for value received,
______________ (the "Holder"), or assigns, is entitled, subject to the terms set
forth below, to purchase from the Company from and after the Issue Date of this
Warrant and at any time or from time to time before 5:00 p.m., New York time,
through five (5) years after such date (the "Expiration Date"), up to ________
fully paid and nonassessable shares of Common Stock (as hereinafter defined),
$.01 par value per share, of the Company at a per share purchase price of $____.
The aforedescribed purchase price per share, as adjusted from time to time as
herein provided, is referred to herein as the "Purchase Price". The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Hypertension Diagnostics,
Inc. and any corporation which shall succeed or assume the obligations
of Hypertension Diagnostics, Inc. hereunder.
(b) The term "Common Stock" includes (a) the Company's Common
Stock, $.01 par value per share, as authorized on the date of the
Subscription Agreement referred to in Section 9 hereof, (b) any other
capital stock of any class or classes (however designated) of the
Company, authorized on or after such date, the Holders of which shall
have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled
to preference, and the Holders of which shall ordinarily, in the absence
of contingencies, be entitled to vote for the election of a majority of
directors of the Company (even if the right so to vote has been
suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in
(a) or (b) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
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(c) The term "Other Securities" refers to any stock (other than
Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the Holder of the Warrant at any time
shall be entitled to receive, or shall have received, on the exercise of
the Warrant, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
1. Exercise of Warrant.
1.1. Number of Shares Issuable upon Exercise. From and after the
date hereof through and including the Expiration Date, the Holder hereof
shall be entitled to receive, upon exercise of this Warrant in whole in
accordance with the terms of subsection 1.2 or upon exercise of this
Warrant in part in accordance with subsection 1.3, shares of Common
Stock of the Company, subject to adjustment pursuant to Section 4.
1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form
of subscription attached as Exhibit A hereto (the "Subscription Form")
duly executed by such Holder and surrender of the original Warrant
within seven (7) days of exercise, to the Company at its principal
office or at the office of its Warrant Agent (as provided hereinafter),
accompanied by payment, as provided in Section 2.2(a)(i)-(iii), in the
amount obtained by multiplying the number of shares of Common Stock for
which this Warrant is then exercisable by the Purchase Price then in
effect.
1.3. Partial Exercise. This Warrant may be exercised in part
(but not for a fractional share) by surrender of this Warrant in the
manner and at the place provided in subsection 1.2 except that the
amount payable by the Holder on such partial exercise shall be the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the Holder in the Subscription Form by (b) the Purchase
Price then in effect. On any such partial exercise, the Company, at its
expense, will forthwith issue and deliver to or upon the order of the
Holder hereof a new Warrant of like tenor, in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may request, the number of shares of Common Stock for
which such Warrant may still be exercised.
1.4. Fair Market Value. Fair Market Value of a share of the
Company's Common Stock as of a particular date (a "Determination Date")
shall mean:
(a) If the Company's Common Stock is traded on an
exchange or is quoted on the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") National Market
System, the NASDAQ SmallCap Market or the American Stock
Exchange, Inc., then the closing or last bid price,
respectively, reported for the last business day immediately
preceding the Determination Date.
(b) If the Company's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ
SmallCap Market or the American Stock Exchange, Inc., but is
traded in the over-the-counter market, then the mean of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the
Company's Common Stock is not publicly traded, then as the
Holder and the Company agree or in the absence of agreement by
arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single arbitrator to
be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.
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(d) If the Determination Date is the date of a
liquidation, dissolution or winding up, or any event deemed to
be a liquidation, dissolution or winding up pursuant to the
Company's charter, then all amounts to be payable per share to
Holders of the Common Stock pursuant to the charter in the event
of such liquidation, dissolution or winding up, plus all other
amounts to be payable per share in respect of the Common Stock
in liquidation under the charter, assuming for the purposes of
this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at
the Determination Date.
1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.
1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holders of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.
2.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within seven (7) days thereafter, the Company at its expense (including
the payment by it of any applicable issue taxes) will cause to be issued in the
name of and delivered to the Holder hereof, or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise, plus,
in lieu of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair Market Value
of one full share, together with any other stock or other securities and
property (including cash, where applicable) to which such Holder is entitled
upon such exercise pursuant to Section 1 or otherwise.
2.2. Cashless Exercise.
(a) Payment may be made either in (i) cash or by certified or
official bank check payable to the order of the Company equal to the
applicable aggregate Purchase Price, (ii) by delivery of Common Stock
issuable upon exercise of the Warrants in accordance with Section (b)
below or (iii) by a combination of any of the foregoing methods, for the
number of Common Shares specified in such form (as such exercise number
shall be adjusted to reflect any adjustment in the total number of
shares of Common Stock issuable to the Holder per the terms of this
Warrant) and the Holder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully-paid and non-assessable
shares of Common Stock (or Other Securities) determined as provided
herein.
(b) Notwithstanding any provisions herein to the contrary, if
the Fair Market Value of one share of Common Stock is greater than the
Purchase Price (at the date of calculation as set forth below), in lieu
of exercising this Warrant for cash, upon consent of the Company, the
Holder may elect to receive shares equal to the value (as determined
below) of this Warrant (or the portion thereof being cancelled) by
surrender of this Warrant at the principal office of the Company
together with the properly endorsed Subscription Form in which event the
Company shall issue to the Holder a number of shares of Common Stock
computed using the following formula:
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X=Y (A-B)
-------
A
Where X= the number of shares of Common Stock to be
issued to the Holder
Y= the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
the portion of the Warrant being exercised
(at the date of such calculation)
A= the Fair Market Value of one share of the
Company's Common Stock (at the date of such
calculation)
B= Purchase Price (as adjusted to the date of such
calculation)
(c) The Holder may not employ the cashless exercise feature
described above at any time that the Warrant Stock to be issued upon
exercise is included for unrestricted resale in an effective
registration statement.
3. Adjustment for Reorganization, Consolidation, Merger, etc.
3.1. Reorganization, Consolidation, Merger, etc. In case at any
time or from time to time, the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other person or
(c) transfer all or substantially all of its properties or assets to any
other person under any plan or arrangement contemplating the dissolution
of the Company, then, in each such case, as a condition to the
consummation of such a transaction, proper and adequate provision shall
be made by the Company whereby the Holder of this Warrant, on the
exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive,
in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock
and other securities and property (including cash) to which such Holder
would have been entitled upon such consummation or in connection with
such dissolution, as the case may be, if such Holder had so exercised
this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other securities and
property (including cash, where applicable) receivable by the Holders of
the Warrants after the effective date of such dissolution pursuant to
this Section 3 to a bank or trust company having its principal office in
New York, NY, as trustee for the Holder or Holders of the Warrants.
3.3. Continuation of Terms. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any
transfer) referred to in this Section 3, this Warrant shall continue in
full force and effect and the terms hereof shall be applicable to the
shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following
any such transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of
any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall
have expressly assumed the terms of this Warrant as provided in Section
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4. In the event this Warrant does not continue in full force and effect
after the consummation of the transaction described in this Section 3,
then only in such event will the Company's securities and property
(including cash, where applicable) receivable by the Holders of the
Warrants be delivered to the Trustee as contemplated by Section 3.2.
4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock or (c) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this Section 4. The number
of shares of Common Stock that the Holder of this Warrant shall thereafter, on
the exercise hereof as provided in Section 1, be entitled to receive shall be
increased to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 4) be
issuable on such exercise by a fraction of which (a) the numerator is the
Purchase Price that would otherwise (but for the provisions of this Section 4)
be in effect, and (b) the denominator is the Purchase Price in effect on the
date of such exercise.
5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 12 hereof).
6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. From and after forty-five (45) days after the Issue Date of this
Warrant, the Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
Holders of the Company's Common Stock.
7. Assignment; Exchange of Warrant. Subject to compliance with
applicable securities laws, this Warrant, and the rights evidenced hereby, may
be transferred by any registered Holder hereof (a "Transferor") with respect to
any or all of the Shares. On the surrender for exchange of this Warrant, with
the Transferor's endorsement in the form of Exhibit B attached i hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable securities
laws, the Company at its expense, but with payment by the Transferor of any
applicable transfer taxes) will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name
5
of the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a "Transferee"), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face or
faces of the Warrant so surrendered by the Transferor.
8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in a Subscription Agreement entered into by the Company and Subscriber of
the Company's 8% Convertible Notes at or prior to the issue date of this
Warrant. THE TERMS OF THE SUBSCRIPTION AGREEMENT ARE INCORPORATED HEREIN BY THIS
REFERENCE. Upon the occurrence of a Non-Registration Event, as defined in the
Subscription Agreement, in the event the Company is unable to issue Common Stock
upon exercise of this Warrant that has been registered in the Registration
Statement described in Section 10.1 of the Subscription Agreement, within the
time periods described in the Subscription Agreement, which Registration
Statement must be effective for the periods set forth in the Subscription
Agreement, or upon the occurrence of an Approval Default as described in the
Subscription Agreement, then upon written demand made by the Holder, the Company
will pay to the Holder of this Warrant, in lieu of delivering Common Stock, a
sum equal to the closing price of the Company's Common Stock on the Principal
Market (as defined in the Subscription Agreement) or such other principal
trading market for the Company's Common Stock on the trading date immediately
preceding the date notice is given by the Holder, less the Purchase Price, for
each share of Common Stock designated in such notice from the Holder.
10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date, which would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock
of the Company on such date. For the purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate exercises which would result in the issuance of more than 4.99%. The
restriction described in this paragraph may be revoked upon seventy-five (75)
days prior notice from the Holder to the Company. The Holder may allocate which
of the equity of the Company deemed beneficially owned by the Subscriber shall
be included in the 4.99% amount described above and which shall be allocated to
the excess above 4.99%.
11. Warrant Agent. The Company may, by written notice to the each
Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1,
exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
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12. Transfer on the Company's Books. Until this Warrant is transferred
on the books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
13. Notices. All notices and other communications from the Company to
the Holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.
HYPERTENSION DIAGNOSTICS, INC.
a Minnesota corporation
By:
-----------------------------------
Xxxx X. Xxxxxxxx, President
Witness:
--------------------------------
EXHIBIT A
FORM OF SUBSCRIPTION
(to be signed only on exercise of Warrant)
TO: HYPERTENSION DIAGNOSTICS, INC.
The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):
___ ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):
___ $__________ in lawful money of the United States; and/or
___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or
___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________________________
whose address is ______________________________________________________________
_______________________________________________________________________________
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act"), or pursuant to an exemption from
registration under the Securities Act.
Dated:___________________ ______________________________________
(Signature must conform to name of
Holder as specified on the face of the
Warrant)
______________________________________
______________________________________
(Address)
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EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of HYPERTENSION DIAGNOSTICS, INC. to which the within
Warrant relates specified under the headings "Percentage Transferred" and
"Number Transferred," respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of HYPERTENSION DIAGNOSTICS, INC. with full power of substitution in the
premises.
---------------------------------------- -------------------------------------- --------------------------------------
Transferees Percentage Transferred Number Transferred
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Dated: ______________, ___________ _______________________________________
(Signature must conform to name of
Holder as specified on the face of the
warrant)
Signed in the presence of:
___________________________________ _______________________________________
(Name)
_______________________________________
(address)
ACCEPTED AND AGREED:
[TRANSFEREE] _______________________________________
_______________________________________
(address)
___________________________________
(Name)
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