EXHIBIT VII
COMPLETE WELLNESS CENTERS, INC.
Common Stock Purchase Warrant
Dated as of January 12, 1998
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND SUCH LAWS.
TABLE OF CONTENTS
1. Exercise of Warrant............................................ 1
1.1. Manner of Exercise....................................... 1
1.2. When Exercise Effective.................................. 2
1.3. Delivery of Stock Certificates, etc...................... 2
1.4. Restriction on Exercise.................................. 2
2. Adjustment of Common Stock Issuable Upon
Exercise. ............................................. 3
2.1. General; Warrant Quantity................................ 3
2.2. Adjustment of Warrant Quantity........................... 3
2.3. Treatment of Options and Convertible
Securities............................................. 4
2.4. Treatment of Stock Dividends, Stock Splits,
etc.................................................... 6
2.5. Computation of Consideration............................. 7
2.6. Adjustments for Combinations, etc........................ 8
2.7. Dilution in Case of Other Securities..................... 8
2.8. Minimum Adjustment of Warrant Quantity................... 8
2.9. No Duplication of Adjustments............................ 9
3. Consolidation, Xxxxxx, etc..................................... 9
3.1. Adjustments for Consolidation, Merger, Sale
of Assets, Reorganization, etc......................... 9
3.2. Assumption of Obligations................................ 10
4. Other Dilutive Events.......................................... 10
5. No Dilution or Impairment...................................... 11
6. Accountants' Report as to Adjustments.......................... 11
7. Financial and Business Information............................. 12
7.1. Quarterly Information.................................... 12
7.2. Annual Information....................................... 12
7.3. Filings.................................................. 13
7.4. Notices of Corporate Action.............................. 13
8. Registration of Common Stock................................... 14
9. Restrictions on Transfer....................................... 14
9.1. Restrictive Legends...................................... 14
9.2. Transfer to Comply With the Securities Act............... 15
9.3. Termination of Restrictions.............................. 15
10. Reservation of Stock, etc...................................... 15
11. Registration and Transfer of Warrants, etc. ................... 16
11.1. Warrant Register; Ownership of Warrants.................. 16
11.2. Transfer of Warrants..................................... 16
11.3. Replacement of Warrants.................................. 17
11.4. Adjustments To Warrant Quantity.......................... 17
11.5. Fractional Shares........................................ 17
12. Redemption..................................................... 17
12.1. Amounts Redeemable....................................... 17
12.2. Redemption Price......................................... 18
12.3. Notice of Partial Redemption; Payment.................... 18
13. Definitions.................................................... 18
14. Remedies; Specific Performance................................. 23
15. No Rights or Liabilities as Shareholder........................ 23
16. Notices........................................................ 23
17. Amendments..................................................... 25
18. Descriptive Headings, Etc...................................... 25
19. Governing Law.................................................. 25
20. Judicial Proceedings; Waiver of Jury........................... 25
21. Registration Rights Agreement.................................. 26
22. Determination of Current Market Price or Market
Price....................................................... 26
COMPLETE WELLNESS CENTERS, INC.
Common Stock Purchase Warrant
Void After January 12, 2005
No. W-1 January 12, 1998
COMPLETE WELLNESS CENTERS, INC. (the "Company"), a Delaware
corporation, for value received, hereby certifies that Wexford Spectrum
Investors LLC ("Wexford"), or its registered assigns (each, a "Holder"),
is entitled to purchase from the Company an aggregate of 570,000 duly
authorized, validly issued, fully paid and nonassessable shares of common
stock, par value $0.0001665 per share, of the Company (the "Common
Stock") at the purchase price per share of $1.75, at any time or from
time to time prior to 5:30 PM, New York City time, on January 12, 2005
(the "Expiration Date"), all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants
(the "Warrants," such term to include any such warrants issued in
substitution therefor) originally issued in connection with the
Investment Agreement, dated as of December 19, 1997 and as supplemented
as of January 12, 1998, by and among the Company, Wexford and Imprimis
Investors LLC (as amended or otherwise modified from time to time, the
"Investment Agreement"). The Warrants are subject to adjustment as
provided herein. Certain capitalized terms used in this Warrant are
defined in Section 13; references to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to this Warrant and references
to a "Section" are, unless otherwise specified, to one of the Sections of
this Warrant.
1. Exercise of Warrant.
1.1. Manner of Exercise. Subject to the restrictions set forth in
Section 1.4, this Warrant may be exercised by the Holder, in whole or in
part, at any time or from time to time, on or after the date hereof,
during normal business hours on any Business Day, by surrender of this
Warrant to the Company at its principal office, accompanied by the Form
of Subscription in substantially the form attached as Exhibit A to this
Warrant (or a reasonable facsimile thereof) duly executed by the Holder
and accompanied by payment, in cash, by certified or official bank check
payable to the order of the Company, or in the manner provided in Section
1.5 or Section 1.6 (or by any combination of such methods), in the amount
obtained by multiplying (a) the number of shares of Common Stock
designated in such Form of Subscription (adjusted as provided in Sections
2 through 4) by (b) the Warrant Price at the time of the exercise, as
determined in accordance with Section 2.1, and the Holder shall thereupon
be entitled to receive such number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities
as provided below).
1.2. When Exercise Effective. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been
surrendered to the Company as provided in Section 1.1. At such time the
Person or Persons in whose name or names any certificate or certificates
for shares of Common Stock (or Other Securities) shall be issuable upon
such exercise, as provided in Section 1.3, shall be deemed to have become
the Holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any
event within three Business Days thereafter, the Company at its expense
(including the payment by it of any applicable transfer taxes) will cause
to be issued in the name of and delivered to the Holder hereof or,
subject to Section 11, as the Holder (upon payment by the Holder of any
applicable transfer taxes) may direct,
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares,
including, if the Company so elects, fractional shares, of Common
Stock (or Other Securities) to which such Holder shall be entitled
upon such exercise plus, at the discretion of the Company, in lieu
of any fractional share to which such Holder would otherwise be
entitled, cash in an amount equal to the same fraction of the
Current Market Price per share on the Business Day next preceding
the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock equal
(without giving effect to any adjustment thereof) to the number of
such shares called for on the face of this Warrant minus the number
of such shares designated by the Holder upon such exercise as
provided in Section 1.1.
1.4. Restriction on Exercise. This Warrant may not be exercised
(a) to the extent that the shares of Common Stock held by any
holders of this and any other Warrants then outstanding, in the
aggregate after giving effect to such exercise, would exceed 50% of
the shares of Common Stock then issued and outstanding; and
(b) to the extent that such exercise would reduce the
remaining number of shares issuable under this and any
other Warrants then outstanding below the Redemption Eligible
Amount. The "Redemption Eligible Amount" shall mean,
(i) for the period through December 31, 1998,
1,500,000;
(ii) for the period from January 1, 1999 through
March 31, 2000, 1,200,000;
(iii) for the period from April 1, 2000 through
March 31, 2001, 600,000; and
(iv) at any time after March 31, 2001, 0;
provided, however, that the Redemption Eligible Amount will be
appropriately adjusted to reflect transactions or other matters giving
rise to adjustments to the Warrant Quantity.
2. Adjustment of Common Stock Issuable Upon Exercise.
2.1. General; Warrant Quantity. This Warrant initially evidences
the right to purchase a number of shares of Common Stock set forth in the
first paragraph of this Warrant (the "Initial Number"), subject to
adjustment as provided in this Section 2, and in Sections 3 and 4. The
"Warrant Price" shall be fixed at $1.75 per share of Common Stock
received upon exercise of this Warrant, provided, however, that if the
Company, (a) within 120 days following a request by any Holder of a
Warrant other than a Withdrawn Demand Registration, fails to effect or
maintain the registration of Registrable Securities pursuant to, and for
the period contemplated by, Section 2.1 of the Registration Rights
Agreement, or (b) fails to effect or maintain the registration of
Registrable Securities pursuant to Section 2.2 of the Registration Rights
Agreement, then the Warrant Price shall be reduced by $0.25. The Warrant
Price may be so reduced only once. The Warrant Price shall be so reduced
notwithstanding that (i) the Company shall have used its best efforts to
effect and maintain the registration of Registrable Securities, or (ii)
there has been any postponement of registration pursuant to Section 2.7
of the Registration Rights Agreement.
2.2. Adjustment of Warrant Quantity.
(a) Issuance of Additional Shares of Common Stock. In case
the Company at any time or from time to time after the date hereof shall
issue or sell Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 2.3 or
2.4) without consideration or for a consideration per share less than the
Current Market Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to Section 2.8, the number of shares
of Common Stock provided for in the Warrant shall be increased,
concurrently with such issue or sale, to an amount determined by
multiplying such number by a fraction (a) the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such
issue or sale, provided that, for the purposes of this Section 2.2(a),
(x) immediately after any Additional Shares of Common Stock are deemed to
have been issued pursuant to Section 2.3 or 2.4, such Additional Shares
shall be deemed to be outstanding, and (y) treasury shares shall not be
deemed to be outstanding, and (b) the denominator of which shall be (i)
the number of shares of Common Stock outstanding immediately prior to
such issue or sale plus (ii) the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number
of such Additional Shares of Common Stock so issued or sold would
purchase at such Current Market Price.
(b) Dividends and Distributions. In case the Company at any
time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation,
any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock
other than a dividend payable in Additional Shares of Common Stock the
Holder of this Warrant shall receive the same dividend per share of
Common Stock then issuable upon exercise of this Warrant based upon the
maximum number of shares of Common Stock at the time issuable to such
Holder as the holders of Common Stock.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall
issue, sell, grant or assume, or shall fix a record date for the
determination of holders of any class of securities entitled to receive,
any Options or Convertible Securities, then, and in each such case, the
maximum number of Additional Shares of Common Stock (as set forth in the
instrument relating thereto, without regard to any provisions contained
therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue, sale, grant or assumption or, in
case such a record date shall have been fixed, as of the close of
business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not
be deemed to have been issued unless the consideration per share
(determined pursuant to Section 2.5) of such shares would be less than
the Current Market Price in effect on the date of and immediately prior
to such issue, sale, grant or assumption or immediately prior to the
close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be, and provided, further, that in
any such case in which Additional Shares of Common Stock are deemed to be
issued,
(a) whether or not the Additional Shares of Common Stock
underlying such Options or Convertible Securities are deemed to be
issued, no further adjustment of the Warrant Quantity shall be made
upon the subsequent issue or sale of Convertible Securities or
shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, except in
the case of any such Options or Convertible Securities which
contain provisions requiring an adjustment, subsequent to the date
of the issue or sale thereof, of the number of Additional Shares of
Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities by reason of
(x) a change of control of the Company, (y) the acquisition by any
Person or group of Persons of any specified number or percentage of
the Voting Securities of the Company or (z) any similar event or
occurrence, each such case to be deemed hereunder to involve a
separate issuance of Additional Shares of Common Stock, Options or
Convertible Securities, as the case may be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number
of Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise),
the Warrant Quantity computed upon the original issue, sale, grant
or assumption thereof (or upon the occurrence of the record date,
or date prior to the commencement of ex-dividend trading, as the
case may be, with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase insofar as it
affects such Options, or the rights of conversion or exchange under
such Convertible Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not
have been exercised or the expiration of any rights of conversion
or exchange under any such Convertible Securities which (or
purchase by the Company and cancellation or retirement of any such
Convertible Securities the rights of conversion or exchange under
which) shall not have been exercised, the Warrant Quantity computed
upon the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the
commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration (or such cancellation or retirement, as
the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common
Sock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for
the issue or sale of all such Convertible Securities which
were actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon
such conversion or exchange; and
(ii) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued or
sold upon the exercise of such Options were issued at the
time of the issue or sale, grant or assumption of such
Options, and the consideration received by the Company for
the Additional Shares of Common Stock deemed to have then
been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (pursuant to
Section 2.5) upon the issue or sale of such Convertible
Securities with respect to which such Options were actually
exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of decreasing the number of shares issuable
upon exercise of this Warrant by an amount in excess of the amount
of the adjustment thereof originally made in respect of the issue,
sale, grant or assumption of such Options or Convertible
Securities; and
(e) in the case of any such Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the number of shares issuable
upon exercise of this Warrant shall be made until the expiration or
exercise of all such Options, whereupon such adjustment shall be
made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall
declare or pay any dividend on the Common Stock payable in Common Stock,
or shall effect a subdivision of the outstanding shares of Common Stock
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock), then, and in
each such case, Additional Shares of Common Stock shall be deemed to have
been issued (a) in the case of any such dividend, immediately after the
close of business on the record date for the determination of holders of
any class of securities entitled to receive such dividend, or (b) in the
case of any such subdivision, at the close of business on the day
immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this Section
2
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration,
(i) insofar as it consists of cash, be computed at the
net amount of cash received by the Company, without deducting
any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale;
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the fair value
thereof at the time of such issue or sale, as determined in
good faith by the Board of Directors of the Company; and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, all as determined
in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration
per share determined by dividing (i) the total amount, if any,
received and receivable by the Company as consideration for the
issue, sale, grant or assumption of the Options or Convertible
Securities in question, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration to protect against
dilution) payable to the Company upon the exercise in full of such
Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, in each case
computing such consideration as provided in the foregoing
subdivision (a), by (ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number to protect against dilution) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 2.4, relating to stock dividends, stock
splits, etc., shall be deemed to have been issued for no
consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common
Stock, the number of shares issuable upon exercise of this Warrant in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation,
be proportionately decreased.
2.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or
sale upon the conversion or exchange of any stock (or Other Securities)
of the Company (or any issuer of Other Securities or any other Person
referred to in Section 3) or to subscription, purchase or other
acquisition pursuant to any Options issued or granted by the Company (or
any such other issuer or Person) for a consideration such as to dilute,
on a basis consistent with the standards established in the other
provisions of this Section 2, the purchase rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Section 2 with respect to the number
of shares issuable upon exercise of the Warrant shall be made as nearly
as possible in the manner so provided and applied to determine the amount
of Other Securities from time to time receivable upon the exercise of the
Warrant, so as to protect the Holder against the effect of such dilution.
2.8. Minimum Adjustment of Warrant Quantity. If the amount of any
adjustment of the Warrant Quantity required pursuant to this Section 2
would be less than one tenth (1/10) of one percent (1%) of the number of
shares issuable upon exercise of the Warrant in effect at the time such
adjustment is otherwise so required to be made, such amount shall be
carried forward and adjustment with respect thereto made at the time of
and together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall
aggregate at least one tenth (1/10) of one percent (1%) of such number of
shares issuable upon exercise of the Warrant. All calculations under this
Warrant shall be made to the nearest one-hundredth of a share.
2.9. No Duplication of Adjustments. There shall be no adjustment of
the number of shares of Common Stock issuable upon exercise of this
Warrant in case of the issuance of any stock of the Company in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Warrant. If any action or transaction
would require adjustment of the number of shares of Common Stock issuable
upon exercise of this Warrant pursuant to more than one Section of this
Warrant, only one adjustment shall be made and such adjustment shall be
the amount of adjustment that has the highest absolute value.
3. Consolidation, Merger, etc.
3.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the
Company and the Company shall be the continuing or surviving Person but,
in connection with such consolidation or merger, the Common Stock or
Other Securities shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (c)
shall transfer all or substantially all of its properties or assets to
any other Person, or (d) shall effect a capital reorganization or
reclassification of the Common Stock or Other Securities (other than a
capital reorganization or reclassification resulting in the issue of
Additional Shares of Common Stock for which adjustment in the number of
shares of Common Stock issuable upon the exercise of this Warrant is
provided in Section 2.2(a) or 2.2(b)), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and
the terms and in the manner provided in this Warrant, the Holder, upon
the exercise hereof at any time after the consummation of such
transaction, shall be entitled to receive (at the aggregate Warrant Price
in effect at the time of such consummation for all Common Stock or Other
Securities issuable upon such exercise immediately prior to such
consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of
securities, cash or other property to which such Holder would actually
have been entitled as a shareholder upon such consummation if such Holder
had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such consummation) as
nearly equivalent as possible to the adjustments provided for in Sections
2 through 4, provided that if a purchase, tender or exchange offer shall
have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the Holder so designates in a
notice given to the Company on or before the date immediately preceding
the date of the consummation of such transaction, the Holder shall be
entitled to receive the highest amount of securities, cash or other
property to which such Holder would actually have been entitled as a
shareholder if the Holder had exercised this Warrant prior to the
expiration of such purchase, tender or exchange offer and accepted such
offer, subject to adjustments (from and after the consummation of such
purchase, tender or exchange offer) as nearly equivalent as possible to
the adjustments provided for in Sections 2 through 4.
3.2. Assumption of Obligations. Notwithstanding anything contained
in this Warrant to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of Section 3.1 unless,
prior to the consummation thereof, each Person (other than the Company)
which may be required to deliver any stock, securities, cash or property
upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the
Holder, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such
assumption shall be in addition to, and shall not release the Company
from, any continuing obligations of the Company under this Warrant), and
(b) the obligation to deliver to such Holder such shares of stock,
securities, cash or property as, in accordance with the foregoing
provisions of this Section 3, such Holder may be entitled to receive, and
such Person shall have similarly delivered to such Holder an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory
to such Holder, stating that this Warrant shall thereafter continue in
full force and effect and the terms hereof (including, without
limitation, all of the provisions of this Section 3) shall be applicable
to the stock, securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of
any rights pursuant hereto. Nothing in this Section 3 shall be deemed to
authorize the Company to enter into any transaction not otherwise
permitted by this Warrant.
4. Other Dilutive Events. In case any event shall occur as to which the
provisions of Section 2 or Section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential
intent and principles of such Sections, then, in each such case, the
Company shall appoint a firm of independent certified public accountants
of recognized national standing (which may be the regular auditors of the
Company), which shall give their opinion upon the adjustment, if any, on
a basis consistent with the essential intent and principles established
in Sections 2 and 3, necessary to preserve, without dilution, the
purchase rights represented by this Warrant. Upon receipt of such
opinion, the Company will promptly mail a copy thereof to the Holder and
shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will
at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder against dilution or other
impairment. Without limiting the generality of the foregoing, the Company
(a) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (b) will not take any action which results in any
adjustment of the number of shares of Common Stock issuable upon the
exercise of this Warrant if the total number of shares of Common Stock
(or Other Securities) issuable after the action upon the exercise of all
of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise,
and (c) except for the Preferred Stock, will not issue any capital stock
of any class which is preferred as to dividends or as to the distribution
of assets upon voluntary or involuntary dissolution, liquidation or
winding-up, unless the rights of the holders thereof shall be limited to
a fixed sum or percentage of par value or a sum determined by reference
to a formula based on a published index of interest rates, an interest
rate publicly announced by a financial institution or a similar indicator
of interest rates in respect of participation in dividends and to a fixed
sum or percentage of par value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any adjustment
or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense
will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant and cause independent certified public
accountants of recognized national standing (which may be the regular
auditors of the Company) selected by the Company to verify such
computation (other than any computation of the fair value of property as
determined in good faith by the Board of Directors of the Company) and
prepare a report setting forth such adjustment or readjustment and
showing in reasonable detail the method of calculation thereof and the
facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or to be received by the
Company for any Additional Shares of Common Stock issued or sold or
deemed to have been issued, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Warrant Quantity in
effect immediately prior to such issue or sale and as adjusted and
readjusted (if required by Section 2) on account thereof. The Company
will forthwith mail a copy of each such report to each Holder of a
Warrant and will, upon the written request at any time of any Holder of a
Warrant, furnish to such
Holder a like report setting forth the number of shares of Common Stock
issuable upon the exercise of this Warrant at the time in effect and
showing in reasonable detail how it was calculated. The Company will also
keep copies of all such reports at its principal office and will cause
the same to be available for inspection at such office during normal
business hours by any Holder of a Warrant or any prospective purchaser of
a Warrant designated by the Holder thereof.
7. Financial and Business Information
7.1. Quarterly Information. Except during any period when the
Company either (i) is subject to and is in compliance with the reporting
requirements of Section 15(d) of the Exchange Act or (ii) has securities
registered under Section 12(b) or 12(g) of the Exchange Act and is in
compliance with the reporting requirements mandated thereby (such status
being referred to as being a "Public Company"), the Company will deliver
to the Holder, as soon as practicable after the end of each quarterly
fiscal period in each fiscal year of the Company, and in any event within
45 days thereafter, a copy of the unaudited consolidated balance sheet as
at the close of such quarter, and the related unaudited consolidated
statements of income, shareholders' equity and cash flow of the Company
and its subsidiaries for that portion of the fiscal year ending as of the
close of such quarter. Such financial statements shall be prepared by the
Company in accordance with generally accepted accounting principles,
applied on a consistent basis ("GAAP") (except for normal year end
adjustments and the inclusion of footnotes) and accompanied by the
certification of the Company's chief executive officer or chief financial
officer that, to the best of his knowledge, such financial statements are
complete and correct in all material respects and fairly present in
accordance with GAAP (except for normal year end adjustments and the
inclusions of footnotes) the consolidated financial position, the
consolidated statements of income, shareholder equity and cash flow of
the Company and its subsidiaries as at the end of such quarter and for
such year-to-date period, as the case may be.
7.2. Annual Information. Except during any period when the Company
is a Public Company, the Company will deliver to the Holder as soon as
practicable after the end of each fiscal year of the Company, and in any
event within 120 days thereafter, one copy of:
(a) an audited consolidated balance sheet of the Company and
its subsidiaries as at the end of such year, and
(b) audited consolidated statements of income, shareholders'
equity and cash flow of the Company and its subsidiaries for such
year;
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all prepared in
accordance with GAAP, and which audited financial statements shall be
accompanied by (i) a certification of the chief executive officer or
chief financial officer of the Company that, to the best of his
knowledge, all such financial statements are complete and correct in all
material respects and present fairly in accordance with GAAP the
consolidated financial position of the Company and its subsidiaries as at
the end of such fiscal year and for the period then ended, (ii) an
opinion thereon of the independent certified public accountants regularly
retained by the Company, or any other firm of independent certified
public accountants of recognized national standing selected by the
Company, and (iii) a report of such independent certified public
accountants confirming any adjustment made pursuant to Section 2 during
such year.
7.3. Filings. During any period when the Company is a Public
Company, the Company will file on or before the required date all
required regular or periodic reports (pursuant to the Exchange Act) with
the Commission and will deliver to the Holder promptly upon their
becoming available one copy of each report, notice or proxy statement
sent by the Company to its stockholders generally, and of each regular or
periodic report (pursuant to the Exchange Act) and any Registration
Statement, prospectus or written communication (other than transmittal
letters) (pursuant to the Securities Act), filed by the Company with (i)
the Commission or (ii) any securities exchange on which shares of Common
Stock are listed.
7.4. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a
regular periodic dividend payable in cash out of earned surplus in
an amount not exceeding the amount of the immediately preceding
cash dividend for such period) or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and
any other Person or any transfer of all or substantially all the
assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the Holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of
such dividend, distribution or right, and (ii) the date or expected date
on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up
is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock (or Other Securities) shall
be entitled to exchange their shares of Common Stock (or Other
Securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up, such notice to
be mailed to the Holder at least 45 days prior to the date therein
specified.
8. Registration of Common Stock. If any shares of Common Stock required
to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any
federal or state law (other than the Securities Act) before such shares
may be issued upon exercise, the Company will, at its reasonable expense
and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered or approved, as the case may be. At any such
time as Common Stock is listed on any national securities exchange, the
Company will, at its reasonable expense, obtain promptly and maintain the
approval for listing on each such exchange, upon official notice of
issuance, the shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such shares after their
issuance; and the Company will also list on such national securities
exchange, will register under the Exchange Act and will maintain such
listing of, any Other Securities that at any time are issuable upon
exercise of the Warrants, if and at the time that any securities of the
same class shall be listed on such national securities exchange by the
Company.
9. Restrictions on Transfer.
9.1. Restrictive Legends. Except as otherwise permitted by this
Section 9, each Warrant (including each Warrant issued upon the transfer
of any Warrant) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
Except as otherwise permitted by this Section 9, each certificate for
Common Stock (or Other Securities) issued upon the exercise of any
Warrant, and each certificate issued upon the transfer of any such Common
Stock (or Other Securities), shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
9.2. Transfer to Comply With the Securities Act. Restricted
Securities may not be sold, assigned, pledged, hypothecated, encumbered
or in any manner transferred or disposed of, in whole or in part, except
in compliance with the provisions of the Securities Act and state
securities or Blue Sky laws and the terms and conditions hereof.
9.3. Termination of Restrictions. The restrictions imposed by this
Section 9 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a
registration statement with respect to the sale of such securities shall
have been declared effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration
statement, (b) when such securities are sold pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, or (c) when,
in the opinion of both counsel for the Holder and counsel for the
Company, such restrictions are no longer required or necessary in order
to protect the Company against a violation of the Securities Act upon any
sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to
any Restricted Securities, the Holder shall be entitled to receive from
the Company, without expense, new securities of like tenor not bearing
the applicable legends required by Section 9.1.
10. Reservation of Stock, etc. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon exercise of the
Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time
outstanding. All shares of Common Stock (or Other Securities) issuable
upon exercise of any Warrants shall be duly authorized and, when issued
upon such exercise, shall be validly issued and, in the case of shares,
fully paid and nonassessable with no liability on the part of the holders
thereof, and, in the case of all securities, shall be free from all
taxes, liens, security interests, encumbrances, preemptive rights and
charges. The transfer agent for the Common Stock, which may be the
Company ("Transfer Agent"), and every subsequent Transfer Agent for any
shares of the Company's capital stock issuable upon the exercise of any
of the purchase rights represented by this Warrant, are hereby
irrevocably authorized and directed at all times until the Expiration
Date to reserve such number of authorized and unissued shares as shall be
requisite for such purpose. The Company shall keep copies of this Warrant
on file with the Transfer Agent for the Common Stock and with every
subsequent Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by this
Warrant. The Company shall supply such Transfer Agent with duly executed
stock certificates for such purpose. All Warrant certificates surrendered
upon the exercise of the rights thereby evidenced shall be canceled, and
such canceled Warrants shall constitute sufficient evidence of the number
of shares of stock which have been issued upon the exercise of such
Warrants. Subsequent to the Expiration Date, no shares of stock need be
reserved in respect of any unexercised Warrant.
11. Registration and Transfer of Warrants, etc.
11.1. Warrant Register; Ownership of Warrants. Each Warrant issued
by the Company shall be numbered and shall be registered in a warrant
register (the "Warrant Register") as it is issued and transferred, which
Warrant Register shall be maintained by the Company at its principal
office or, at the Company's election and expense, by a Warrant Agent or
the Company's Transfer Agent. The Company shall be entitled to treat the
registered Holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of
any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer
thereof as the owner of such Warrant for all purposes. Subject to Section
9, a Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
11.2. Transfer of Warrants. Subject to compliance with Section 9,
if applicable, this Warrant and all rights hereunder are transferable in
whole or in part, without charge to the Holder hereof, upon surrender of
this Warrant with a properly executed Form of Assignment attached hereto
as Exhibit B at the principal office of the Company. Upon any partial
transfer, the Company shall at its expense issue and deliver to the
Holder a new Warrant of like tenor, in the name of the Holder, which
shall be exercisable for such number of shares of Common Stock with
respect to which rights under this Warrant were not so transferred.
11.3. Replacement of Warrants. On receipt by the Company 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 reasonably satisfactory in form and amount to the Company or,
in the case of any such mutilation, on surrender of such Warrant to the
Company at its principal office and cancellation thereof, the Company at
its expense shall execute and deliver, in lieu thereof, a new Warrant of
like tenor.
11.4. Adjustments To Warrant Quantity. Notwithstanding any
adjustment in the Warrant Quantity or in the number or kind of shares of
Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number
and kind of shares of Common Stock as are stated in this Warrant, as
initially issued.
11.5. Fractional Shares. Notwithstanding any adjustment pursuant to
Section 2 in the number of shares of Common Stock covered by this Warrant
or any other provision of this Warrant, the Company may, but shall not be
required to, issue fractions of shares upon exercise of this Warrant or
to distribute certificates which evidence fractional shares. In lieu of
fractional shares, the Company shall make payment to the Holder, at the
time of exercise of this Warrant as herein provided, in an amount in cash
equal to such fractions multiplied by the Current Market Price of a share
of Common Stock on the date of Warrant exercise.
12. Redemption.
12.1. Amounts Redeemable. At the option of the Company, this
Warrant will be partially redeemable under each of the following
circumstances, with each such partial redemption to reduce the aggregate
number of shares of Common Stock issuable hereunder and any other
Warrants then outstanding by the lesser of 300,000 and the aggregate
number of shares then issuable hereunder and thereunder and each such
partial redemption to be applied pro rata to the shares issuable
hereunder and thereunder:
(a) prior to January 1, 1999, if the all of the Preferred
Stock has been redeemed or repurchased by the Company prior to such
date;
(b) prior to March 31, 2000, if pre-tax earnings per share of
the Common Stock for the fiscal year 1999 equals or exceeds $1.25
on a Fully Diluted Basis;
(c) prior to March 31, 2000, if pre-tax earnings per share of
Common Stock for the combined fiscal years 1998 and 1999 equals or
exceeds $1.90 on a Fully Diluted Basis;
(d) prior to March 31, 2001, if pre-tax earnings per share of
Common Stock for the fiscal year 2000 equals or exceeds $2.00 on a
Fully Diluted Basis; and
(e) prior to March 31, 2001, if pre-tax earnings per share of
Common Stock for the combined fiscal years 1998, 1999 and 2000
equals or exceeds $4.10 on a Fully Diluted Basis;
provided, however, that the partial redemption amount of 300,000 and the
pre-tax earnings per share amounts will be appropriately adjusted to
reflect transactions or other matters giving rise to adjustments to the
Warrant Quantity.
12.2. Redemption Price. The redemption price in respect of any
partial redemption of this Warrant will be payable in cash to the Holder
on the Redemption Date (as defined below) in an amount equal to the
aggregate reduction in the number of shares of Common Stock issuable
pursuant to this Warrant by reason of such partial redemption times $.01.
12.3. Notice of Partial Redemption; Payment; Effect of Notice.
(a) The Company may exercise its partial redemption right by
giving written notice of such exercise to the Holder not less than five
Business Days prior to the date fixed for such redemption (the
"Redemption Date"), such notice to specify the Redemption Date and the
amount of the reduction in the number of shares of Common Stock issuable
hereunder by reason of such partial redemption and to be accompanied by a
computation of the pre-tax earnings per share amount or amounts giving
rise to such partial redemption as verified by independent certified
public accountants of recognized national standing (which may be the
regular auditors of the Company) selected by the Company to verify such
computation.
(b) The Company shall make partial redemption payments by
wire transfer to the Holder to an account designated by the Holder at
least two business days prior to the Redemption Date. On any Redemption
Date, the Company shall make any necessary adjustments in the Warrant
Register to reflect the reduction in the number of shares of Common Stock
issuable hereunder.
13. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to Section 2.3 or
2.4, deemed to be issued) by the Company after the date hereof, whether
or not subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) such additional number of shares as may become issuable
upon the exercise of the Warrants by reason of adjustments required
pursuant to anti-dilution provisions applicable to the Warrants as
in effect on the date hereof,
(c) shares, warrants, options and other securities issued at
any time to the Holder or any Affiliate thereof, and
(d) shares issued upon exercise of any options, warrants,
rights for, or securities convertible into, Common Stock
outstanding as of the date of this Warrant and listed on Exhibit C
hereto or granted under the agreements and plans listed on Exhibit
C hereto, in each such case only to the extent that such options,
warrants, rights, convertible securities, agreements and plans are
not amended and only to the extent that the respective numbers of
shares so issued do not exceed the respective numbers of shares
indicated on Exhibit C.
Affiliate: Any person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the applicable person. For purposes of this definition
"control" has the meaning specified in Rule 12b-2 under the Exchange Act.
Business Day: Any day other than a Saturday or a Sunday or a day
on which commercial banking institutions in the City of New York are
authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant,
such term to include any stock into which such Common Stock shall have
been changed or any stock resulting from any reclassification of such
Common Stock, and all other stock of any class or classes (however
designated) of the Company the holders of which 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 or have
the right to vote at elections of directors of the Company, the
authorization of any shares of Common Stock or mergers, consolidations or
sales of assets of the Company.
Company: As defined in the introduction to this Warrant, such
term to include any corporation which shall succeed to or assume the
obligations of the Company hereunder in compliance with Section 3.
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
Current Market Price: On any date specified herein, the average
daily Market Price during the period of the most recent 20 days, ending
on such date, on which the national securities exchanges were open for
trading, except that if no Common Stock is then listed or admitted to
trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market
Price on such date under clause (d) of the definition thereof.
Demand Registration Statement: As defined in the Registration
Rights Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Expiration Date: As defined in the introduction to this Warrant.
Fully-Diluted Basis: As of the date of any determination, the
outstanding Common Stock plus the maximum number of shares of Common
Stock that would be issued upon the exercise, conversion or exchange of
any outstanding securities, warrants or options upon the terms thereof,
whether or not then exercisable, convertible, exchangeable or subject to
any vesting period, plus the maximum number of shares of Common Stock
issuable pursuant to any agreement by which the Company is bound whether
or not such stock is then required to be issued.
Holder: As defined in the introduction to this Warrant.
Investment Agreement: As defined in the introduction to this
Warrant.
Market Price: On any date specified herein, the amount per share
of the Common Stock, equal to (a) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes
place on such date, the average of the closing bid and asked prices
thereof regular way on such date, in either case as officially reported
on the principal national securities exchange on which such Common Stock
is then listed or admitted for trading, or (b) if such Common Stock is
not then listed or admitted for trading on any national securities
exchange but is designated as a national market system security by the
NASD, including the Nasdaq Small Cap market, the last reported trading
price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common Stock on such
date as shown by the NASD automated quotation system, or (d) if such
Common Stock is not then listed or admitted for trading on any national
exchange or quoted in the over-the-counter market, the higher of (x) the
book value thereof as determined by any firm of independent public
accountants of recognized standing selected by the Board of Directors of
the Company as of the last day of any month ending within 60 days
preceding the date as of which the determination is to be made and (y)
the fair value thereof (as of a date which is within 20 days of the date
as of which the determination is to be made) determined in good faith by
the Board of Directors of the Company, which determination may be
challenged by any Holder pursuant to Section 22 within 30 days of receipt
of notice thereof.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase
or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, 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 3 or otherwise.
Person: A corporation, an association, a partnership, an
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
Preferred Stock: The Senior Redeemable Preferred Stock of the
Company issued pursuant to the Investment Agreement.
Registrable Securities: As defined in the Registration Rights
Agreement.
Registration Rights Agreement: The Registration Rights
Agreement, dated the date hereof, by and among the Company and the
Initial Holders specified on the signature page thereof.
Restricted Securities: (a) any Warrants bearing the applicable
legend set forth in Section 9.1, (b) any shares of Common Stock (or Other
Securities) issued or issuable upon the exercise of Warrants which are
evidenced by a certificate or certificates bearing the applicable legend
set forth in such Section, and (c) any shares of Common Stock (or Other
Securities) issued subsequent to the exercise of any of the Warrants as a
dividend or other distribution with respect to, or resulting from a
subdivision of the outstanding shares of Common Stock (or other
Securities) into a greater number of shares by reclassification, stock
splits or otherwise, or in exchange for or in replacement of the Common
Stock (or Other Securities) issued upon such exercise, which are
evidenced by a certificate or certificates bearing the applicable legend
set forth in such Section.
Securities Act: The Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
Subsidiary: with respect to any Person at any time, any
corporation, partnership, joint venture, limited liability company, trust
or estate of which (or in which) more than 50% of:
(a) the issued and outstanding shares of capital stock having
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether at the time shares of capital
stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency);
(b) the interest in the capital or profits of such
corporation, professional corporation, partnership, joint venture or
limited liability company; or
(c) the beneficial interest in such trust or estate, is, at
such time, directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one or more
of such Person's other Subsidiaries.
Voting Securities: Stock of any class or classes (or equivalent
interests), if the holders of the stock of such class or classes (or
equivalent interests) are ordinarily, in the absence of contingencies,
entitled to vote for the election of the directors (or persons performing
similar functions) of such business entity, even though the right so to
vote has been suspended by the happening of such a contingency.
Warrant: As defined in the introduction to this Warrant.
Warrant Price: As defined in Section 2.1.
Warrant Quantity: At any time, the number of shares of Common
Stock into which the Warrant is exercisable.
Withdrawn Demand Registration: As defined in the Registration
Rights Agreement.
14. Remedies; Specific Performance. The Company stipulates that there
would be no adequate remedy at law to the Holder in the event of any
default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant and accordingly, the
Company agrees that, in addition to any other remedy to which the Holder
may be entitled at law or in equity, the Holder shall be entitled to seek
to compel specific performance of the obligations of the Company under
this Warrant, without the posting of any bond, in accordance with the
terms and conditions of this Warrant in any court of the United States or
any State thereof having jurisdiction, and if any action should be
brought in equity to enforce any of the provisions of this Warrant, the
Company shall not raise the defense that there is an adequate remedy at
law. Except as otherwise provided by law, a delay or omission by the
Holder hereto in exercising any right or remedy accruing upon any such
breach shall not impair the right or remedy or constitute a waiver of or
acquiescence in any such breach. No remedy shall be exclusive of any
other remedy. All available remedies shall be cumulative.
15. No Rights or Liabilities as Shareholder. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof any
rights as a shareholder of the Company or as imposing any obligation on
the Holder to purchase any securities or as imposing any liabilities on
the Holder as a shareholder of the Company, whether such obligation or
liabilities are asserted by the Company or by creditors of the Company.
16. Notices.
(a) All notices and other communications (and deliveries)
provided for or permitted hereunder shall be made in writing by
hand delivery, telecopier, any courier guaranteeing overnight
delivery or first class registered or certified mail, return
receipt requested, postage prepaid, addressed (i) if to the
Company, to the attention of its President at its principal office
located at 000 Xxxxxxxxxxxx Xxxxxx, X.X. Washington, D.C. 20003,
Telecopy: (000) 000-0000 or such other address or telecopy number
as may hereafter be designated in writing by the Company to the
Holder in accordance with the provisions of this Section, with a
copy to Xxxxxxx Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attn: Xxxxx X. Xxxxxxx, Esq., Telecopy:
(000) 000-0000, (ii) If to the initial Holder, to Wexford Management
LLC, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000, Attn:
Xxxxx Xxxxxxxx, Telecopy: (000) 000-0000 or such other address or
telecopy number as may hereafter be designated in writing by the
Holder to the Company in accordance with the provisions of this
Section, with a copy to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxxxx X. Xxxx,
Esq., Telecopy: (000) 000-0000, or (iii) if to any subsequent
Holder, at its address as it appears in the Warrant Register.
All such notices and communications (and deliveries) shall be
deemed to have been duly given: at the time delivered by hand, if
personally delivered; when receipt is acknowledged, if telecopied;
on the next Business Day, if timely delivered to a courier
guaranteeing overnight delivery; and five days after being
deposited in the mail, if sent first class or certified mail,
return receipt requested, postage prepaid; provided, that the
exercise of any Warrant shall be effective in the manner provided
in Section 1.
(b) If:
(i) the Company shall declare a dividend (or any other
distribution) on the Common Stock; or
(ii) the Company shall authorize the granting to all
holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of any class or any
other rights or warrants; or
(iii) there shall be any reclassification of the Common
Stock or any consolidation or merger to which the Company is
a party and for which approval of any shareholders of the
Company is required, or a statutory share exchange, or self
tender offer by the Company for all or substantially all of
its outstanding shares of Common Stock or the sale or
transfer of all or substantially all of the assets of the
Company as an entity; or
(iv) there shall occur the involuntary or voluntary
liquidation, dissolution or winding up of the Company,
then the Company shall cause to be mailed to the Holder, at the
address as shown on the stock records of the Company, as promptly
as possible, but at least 15 Business Days prior to the applicable
date hereinafter specified, a notice stating (A) the date on which
a record is to be taken for the purpose of such dividend,
distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights or warrants
are to be determined or (B) the date on which such
reclassification, consolidation, merger, statutory share exchange,
sale, transfer, liquidation, dissolution or winding up is expected
to become effective, and the date as of which it is expected that
holders of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation, dissolution
or winding up.
(c) Whenever the number of shares of Common Stock issuable
upon exercise of this Warrant is adjusted as herein provided, the
Company shall prepare a notice of such adjustment setting forth the
adjusted number of shares of Common Stock issuable upon exercise of
this Warrant, the basis and the computation thereof, and the
effective date of such adjustment and shall mail such notice to the
Holder at the Holder's last address as shown on the stock records
of the Company.
17. Amendments. This Warrant and any term hereof may not be amended,
modified, supplemented or terminated, and waivers or consents to
departures from the provisions hereof may not be given, except by written
instrument duly executed by the Holders of a majority-in-interest of the
Warrants.
18. Descriptive Headings, Etc. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant
otherwise requires: (1) words of any gender shall be deemed to include
each other gender; (2) words using the singular or plural number shall
also include the plural or singular number, respectively; (3) the words
"hereof," "herein" and "hereunder" and words of similar import when used
in this Warrant shall refer to this Warrant as a whole and not to any
particular provision of this Warrant, and Section and paragraph
references are to the Sections and paragraphs of this Warrant unless
otherwise specified; (4) the word "including" and words of similar import
when used in this Warrant shall mean "including, without limitation,"
unless otherwise specified; (5) "or" is not exclusive; and (6) provisions
apply to successive events and transactions.
19. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without giving effect
to the conflict of laws principles thereof).
20. Judicial Proceedings; Waiver of Jury. Any legal action, suit or
proceeding brought against the Company with respect to this Warrant may
be brought in any federal court of the Southern District of New York or
any state court located in New York County, State of New York, and by
execution and delivery of this Warrant, the Company hereby irrevocably
and unconditionally waives any claim (by way of motion, as a defense or
otherwise) of improper venue, that it is not subject personally to the
jurisdiction of such court, that such courts are an inconvenient forum or
that this Warrant or the subject matter may not be enforced in or by such
court. The Company hereby irrevocably and unconditionally consents to the
service of process of any of the aforementioned courts in any such
action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided
for in Section 16 (with copies of such process also being sent to the
Company's counsel referred to in such section), such service to become
effective 30 days after such mailing. Nothing herein contained shall be
deemed to affect the right of any party to serve process in any manner
permitted by law or commence legal proceedings or otherwise proceed
against any other party in any other jurisdiction to enforce judgments
obtained in any action, suit or proceeding brought pursuant to this
Section. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY
ACTION, SUIT OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY IT OR
THE HOLDER IN CONNECTION WITH THIS WARRANT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
21. Registration Rights Agreement. The shares of Common Stock (and Other
Securities) issuable upon exercise of this Warrant (or upon conversion of
any shares of Common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all
of the benefits afforded to a holder of any such Registrable Securities
under the Registration Rights Agreement and such holder, by its
acceptance of this Warrant, agrees to be bound by and to comply with the
terms and conditions of the Registration Rights Agreement applicable to
such holder as a holder of such Registrable Securities.
22. Determination of Current Market Price or Market Price.
(a) The determination by the Board of Directors of the
Current Market Price or Market Price shall be final and binding
absent manifest error except that the determination of Market Price
under clause (d) of the definition thereof may be challenged by the
Holders of a majority-in-interest of the Warrants within 30 days
after notice of any adjustment in the number of shares of Common
Stock issuable upon the exercise of this Warrant utilizing such
definition as sent to the Holders.
(b) Such notice of objection shall specify an investment
banking firm of national reputation to determine the market value
of the Common Stock as of the date of determination by the
Company's Board of Directors. The Company may reject the firm
included in such notice solely based on such firm being an
affiliate of one or more Holders.
(c) The Company shall enter into a standard agreement with
such firm and shall provide full cooperation to such firm with
respect to its evaluation of the Market Value of the Common Stock.
The Company and the Holders shall each pay one-half of the fees and
expenses of such firm; provided, however, that in the event that
the determination by such firm is 110% or more of the original
determination made by the Company's Board of Directors, the Company
shall pay all of the fees and expenses of such firm.
(d) In determining the Market Value of the Common Stock, such
firm may not take into account that the Common Stock at issue does
not control the Company.
(e) The determination by such firm shall be final and binding
on the Company and the Holders.
COMPLETE WELLNESS
CENTERS, INC.
By: /s/ X. Xxxxxx Xxxxxx
----------------------
Name:
Title:
Exhibit A
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To: COMPLETE WELLNESS CENTERS, INC.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, ____
shares of Common Stock of COMPLETE WELLNESS CENTERS, INC. and herewith
makes payment of $ therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to whose address is
Dated:
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(Signature must conform in all respects to the
name of holder as specified on the face of Warrant)
---------------------------------------------------
(Street Address)
---------------------------------------------------
(City) (State) Zip Code)
Exhibit B
FORM OF ASSIGNMENT
[To be executed only upon assignment of Warrant] For value
received, the undersigned registered holder of the within Warrant hereby
sells, assigns and transfers unto the right represented by such Warrant
to purchase shares of Common Stock of COMPLETE WELLNESS CENTERS, INC. to
which such Warrant relates, and appoints Attorney to make such transfer
on the books of COMPLETE WELLNESS CENTERS, INC., maintained for such
purpose, with full power of substitution in the premises.
Dated:
---------------------------------------------------
(Signature must conform in all respects to the
name of holder as specified on the face of Warrant)
---------------------------------------------------
(Street Address)
---------------------------------------------------
(City) (State) Zip Code)
Signed in the presence of:
Exhibit C
LIST OF STOCK OPTION PLANS, WARRANTS AND SIMILAR AGREEMENTS
