THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT PURSUANT TO (1) A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR (2) UPON
DELIVERY OF A LEGAL OPINION TO THE COMPANY, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE COMPANY, THAT ANY SUCH TRANSACTION IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
Dated: ________________________
AMENDED AND RESTATED WARRANT
To Purchase ________ shares of
Common Stock, $.01 par value
of
PERFORMANCE HEALTH TECHNOLOGIES, INC.
Expiring December 31, 2010
THIS IS TO CERTIFY THAT, for value received, North Coast
Securities Corporation, a California corporation, or its registered assigns
(hereinafter referred to as the ("HOLDER"), is entitled to subscribe and
purchase from Performance Health Technologies, Inc., a Delaware corporation (the
"COMPANY"), commencing on the date hereof, _______ shares of Common Stock, $.01
par value, of the Company (the "SHARES"), at the place where the Warrant Agency
(as hereinafter defined) is located, at the Exercise Price (as hereinafter
defined), all subject to adjustment and upon the terms and conditions as
hereinafter provided, and is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter described.
Capitalized terms used in this Warrant and not otherwise
defined shall have the meanings set forth in Article V hereof.
ARTICLE I
EXERCISE OF WARRANTS
Section 1.01 METHOD OF EXERCISE. To exercise this Warrant in whole or
in part, the Holder shall deliver to the Company at the Warrant Agency, (a) this
Warrant, (b) a written notice, in substantially the form of the Subscription
Notice attached hereto, of such Holder's election to exercise this Warrant,
which notice shall specify the number of Shares to be purchased, the
denominations of the share certificate or certificates desired and the name or
names in which such certificates are to be registered and (c) the aggregate
Exercise Price for the Shares purchased (unless the Holder chooses the "cashless
exercise" option provided in the third paragraph of this Section 1.01).
-1-
The Company shall, as promptly as practicable and in any event within
seventy-two hours thereafter, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of Shares specified in said notice. The Share
certificate or certificates so delivered shall be in such denominations as
determined by the Company, or as may be specified in such notice, and shall be
issued in the name of the Holder or such other name or names as shall be
designated in such notice. Such certificate or certificates shall be deemed to
have been issued, and such Holder or any other person so designated to be named
therein shall be deemed for all purposes to have become holders of record of
such Shares, as of the date the aforementioned notice is received by the
Company. If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of the certificate or certificates, deliver to
the Holder a new Warrant evidencing the rights to purchase the remaining Shares
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or, at the request of the Holder, appropriate
notation may be made on this Warrant which shall then be returned to the Holder.
The Company shall pay all expenses, payable in connection with the preparation,
issuance and delivery of Share certificates and new Warrants as contemplated by
Section 2.07 below (other than transfer, income or similar taxes in connection
with the transfer of securities), except that, if Share certificates or new
Warrants shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of such
transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written request
of the Company for payment.
In lieu of a monetary payment of the aggregate Exercise Price, the
Holder may elect to receive, without the payment of any additional
consideration, Shares equal to the value of this Warrant or portion thereof by
the surrender of such Warrant to the Company with the "cashless exercise"
election marked in the form of Subscription Notice. Thereupon, the Company shall
issue to the Holder, such number of fully paid and non-assessable Shares as is
computed using the following formula:
X = Y(A-B)
-----
A
where X = the number of Shares to be issued to the Holder
pursuant to this Section 1.01 upon such cashless
exercise election.
Y = the number of Shares covered by this Warrant in
respect of which the cashless exercise election is
made.
A = the Fair Market Value (as defined in Article V
hereof) of one Share, as at the time the cashless
exercise election is made.
B = the Exercise Price in effect under this Warrant at
the time the cashless exercise election is made.
-2-
Section 1.02 SHARES TO BE FULLY PAID AND NON-ASSESSABLE. All Shares
issued upon the exercise of this Warrant (the "WARRANT SHARES") pursuant to
Section 1.01 above shall be validly issued, fully paid and nonassessable and the
Company shall at all times reserve and keep available out of its authorized
shares of Common Stock a sufficient number of Shares for the purpose of issuance
of the Warrant Shares upon the exercise of this Warrant.
Section 1.03 NO FRACTIONAL SHARES TO BE ISSUED. The Company shall not
be required to issue fractions of Shares upon exercise of this Warrant. If any
fraction of a Share would, but for this Section, be issuable upon any exercise
of this Warrant, in lieu of such fractional Share the Company shall pay to the
Holder or Holders, as the case may be, in cash, an amount equal to the same
fraction of the Fair Market Value per share of outstanding Shares on the
Business Day immediately prior to the date of such exercise.
Section 1.04 SHARE LEGEND. Each certificate for Shares issued upon
exercise of this Warrant shall bear the legend set forth below, unless Holder's
Counsel (as defined below) shall render an opinion in form and substance
reasonably satisfactory to the Company that such legend is not required or at
the time of exercise such Shares are registered under the Securities Act:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR
DISPOSED OF EXCEPT PURSUANT TO (1) A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR (2) UPON DELIVERY OF A LEGAL OPINION TO THE COMPANY,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, THAT ANY
SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless, in the opinion (in form and
substance reasonably satisfactory to the Company) of counsel selected by the
Holder of such certificate and who is reasonably acceptable to the Company
("HOLDER'S COUNSEL"), the securities represented thereby need no longer be
subject to restrictions on resale under the Securities Act.
-3-
ARTICLE II
WARRANT AGENCY; TRANSFER,
EXCHANGE AND REPLACEMENT OF WARRANTS
Section 2.01 WARRANT AGENCY. Until such time, if any, as an independent
agency shall be appointed by the Company to perform services with respect to the
Warrants described herein (the "WARRANT AGENCY"), the Company shall perform the
obligations of the Warrant Agency provided herein at its principal office
address or such other address as the Company shall specify by prior written
notice to all Holders.
Section 2.02 OWNERSHIP OF WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.
Section 2.03 TRANSFER OF WARRANT. The Company agrees to maintain at the
Warrant Agency books for the registration of transfers of this Warrant and all
rights hereunder shall be registered, in whole or in part, on such books, upon
surrender of this Warrant at the Warrant Agency, together with a written
assignment of this Warrant duly executed by the Holder or its duly authorized
agent or attorney. Subject to applicable law and regulation and Section 2.04
hereof, upon surrender of this Warrant as provided for herein, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denominations specified in the instrument of assignment,
and this Warrant shall promptly be canceled. Notwithstanding the foregoing, a
Warrant may be exercised by a new Holder which has become the registered Holder
of such Warrant without having a new Warrant issued.
Section 2.04 RESTRICTIONS ON TRANSFER. The Holder, by its acceptance
hereof, represents that this Warrant is being acquired for its own account, as
an investment and not with a view towards the further resale or the distribution
thereof in violation of the Securities Act, and agrees that this Warrant may not
be transferred, sold, assigned, hypothecated or otherwise disposed of, in whole
or in part, except as provided in the legend on the first page hereof and
provided that the Holder shall have furnished to the Company an opinion of
Holder's Counsel, in form and substance reasonably satisfactory to the Company,
to the effect that such transfer is exempt from the registration requirements of
the Securities Act and any applicable state securities laws.
Section 2.05 DIVISION OR COMBINATION OF WARRANTS. This Warrant may be
divided or combined with other Warrants upon surrender hereof and of any Warrant
or Warrants with which this Warrant is to be combined at the Warrant Agency,
together with a written notice specifying the names and denominations in which
the new Warrant or Warrants are to be issued, signed by the holders hereof and
thereof or their respective duly authorized agents or attorneys. Subject to
compliance with Section 2.04 as to any transfer which may be involved in the
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
-4-
Section 2.06 LOSS, THEFT, DESTRUCTION OF WARRANT CERTIFICATES. Upon
receipt by the Company of a written notice (or other evidence reasonably
satisfactory to the Company) of the loss, theft, destruction or mutilation of
any Warrant and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security reasonably satisfactory to the Company or, in
the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same aggregate number of Shares.
Section 2.07 EXPENSES OF DELIVERY OF WARRANTS. The Company shall pay
all expenses (other than transfer taxes) and other charges payable in connection
with the preparation, issuance and delivery of Warrants and Warrant Shares
hereunder.
ARTICLE III
COMPANY COVENANTS AND REPRESENTATIONS
Section 3.01 COMPANY COVENANTS. In case at any time the Company shall
(a) declare any dividend or distribution on its Shares, whether payable in cash,
stock or other property, (b) offer to all holders of Shares any additional
shares of Common Stock, or any option, right or warrant to subscribe therefor,
or (c) declare a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or propose a sale of
substantially all of its property, assets and business as an entirety, then the
Company shall give written notice to the Holder of the date on which the books
of the Company shall close or a record shall be taken for such action. Such
notice shall also specify the date as of which the holders of Shares of record
shall participate in such dividend or distribution. Such written notice shall be
given at least 30 days and not more than 90 days prior to the action in
question, and not less than 15 days prior to the relevant record date or the
date fixed for determining stockholders entitled to participate therein, as the
case may be.
Section 3.02 AUTHORITY, EXECUTION AND DELIVERY. The Company hereby
represents and warrants that the Company has full corporate power and authority
to enter into this Warrant and to issue Shares in accordance with the terms
hereof. The execution, delivery and performance of this Warrant by the Company
have been duly and effectively authorized by the Company. This Warrant has been
duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.
Section 3.03 INFORMATION REQUIREMENTS. To the extent applicable, the
Company shall promptly furnish the Holder with copies of all reports, proxy
statements and similar materials that it mails to holders of its Common Stock.
ARTICLE IV
ANTIDILUTION PROVISIONS
Section 4.01 ADJUSTMENTS GENERALLY. The Exercise Price and the number
of Shares (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events, as provided in this Article IV.
-5-
Section 4.02 SHARE REORGANIZATION. If the Company shall subdivide its
outstanding Shares into a greater number of Shares or consolidate its
outstanding Shares into a smaller number of Shares (any such event being called
a "SHARE REORGANIZATION"), then (a) the Exercise Price shall be adjusted,
effective immediately after the record date at which the holders of Shares are
determined for purposes of such Share Reorganization, to a price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Shares outstanding
on such record date before giving effect to such Share Reorganization and the
denominator of which shall be the number of Shares outstanding immediately after
giving effect to such Share Reorganization, and (b) the number of Shares subject
to purchase upon exercise of this Warrant shall be adjusted, effective at such
time, to a number determined by multiplying the number of Shares subject to
purchase immediately before such Share Reorganization by a fraction, the
numerator of which shall be the number of Shares outstanding immediately after
giving effect to such Share Reorganization and the denominator of which shall be
the number of Shares outstanding immediately before such Share Reorganization.
Section 4.03 BELOW MARKET DISTRIBUTION.
(a) If the Company shall issue or otherwise sell or distribute
any Shares, other than pursuant to a Share Reorganization (any such event,
including any event described in paragraphs (c) and (d) below, being herein
called a "BELOW-MARKET DISTRIBUTION") for a consideration per share less than
the Exercise Price per Share on the date of such issue, sale or distribution
(before giving effect to such issue, sale or distribution), then, effective upon
such issue, sale or distribution, the Exercise Price shall be reduced to the
price determined by multiplying the Exercise Price in effect immediately prior
to such Below-Market Distribution by a fraction, the numerator of which shall be
the sum of (i) the number of Shares outstanding immediately prior to such
Below-Market Distribution multiplied by the Exercise Price per share on the date
of such Below-Market Distribution plus (ii) the consideration received by the
Company upon such Below-Market Distribution, and the denominator of which shall
be the product of (A) the total number of Shares outstanding immediately after
such Below-Market Distribution, multiplied by (B) the Exercise Price per share
on the date of such Below-Market Distribution. If any Below-Market Distribution
shall require an adjustment to the Exercise Price pursuant to the foregoing
provisions of this paragraph (a), then effective at the time such adjustment is
made, the number of Shares subject to purchase upon exercise of this Warrant
shall be increased to a number determined by multiplying the number of Shares
subject to purchase immediately before such Below-Market Distribution by a
fraction, the numerator of which the numerator of which shall be the Exercise
Price in effect immediately before such Below-Market Distribution and the
denominator of which shall be the Exercise Price in effect immediately after
such Below-Market Distribution.
(b) The provisions of paragraph (a) above, including by
operation of paragraph (c) or (d) below, shall not operate to increase the
Exercise Price or reduce the number of shares of Shares subject to purchase upon
exercise of this Warrant. The provisions of paragraph (a) above, including
operation of paragraph (c) or (d) below, shall not apply to the issuance of any
Shares, the issuance of or exercise of any options, warrants, or other rights,
the conversion of any debt or any other convertible security to the extent (i)
now or hereafter issued or granted pursuant to the Company's Incentive Stock
Plan as in effect on February 24, 2005, (ii) issued in connection with the
Company's private placement pursuant to the placement agent agreement with
Holder dated February 24, 2005, or (iii) arising under transactions or
agreements of the Company prior to February 24, 2005 that the Company has
disclosed to Holder in writing prior to February 24, 2005.
-6-
(c) If the Company shall issue, sell, distribute or otherwise
grant in any manner (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any warrants or options for the
purchase of, Shares or any stock or securities convertible into or exchangeable
for Shares (such rights, warrants or options being herein called "OPTIONS" and
such convertible or exchangeable stock or securities being herein called
"CONVERTIBLE SECURITIES"), whether or not such Options or the rights to convert
or exchange any such Convertible Securities are immediately exercisable, and the
price per share for which securities are issuable upon exercise of such Options
upon conversion or exchange of such Convertible Securities (determined by
dividing (i) the aggregate amount, if any, received or receivable by the Company
as consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of Options to acquire Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of Shares
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options)
shall be less than the Exercise Price per share of outstanding Shares on the
date of granting such Options (before giving effect to such grant), then, for
purposes of paragraph (a) above, the total maximum number of Shares issuable
upon the exercise of such Options or upon conversion or exchange of the
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued as of the date of granting of such Options and
thereafter shall be deemed to be outstanding and the Company shall be deemed to
have received as consideration such price per share, determined as provided
above, therefor. Except as otherwise provided in paragraph (e) below, no
additional adjustment of the Exercise Price shall be made upon the actual
exercise of such Options or upon conversion or exchange of such Convertible
Securities. The adjustment provided for in this paragraph (c) shall give effect
to the change in the Exercise Price and the number of Shares issuable upon the
exercise hereof only with respect to such Options as remain outstanding.
(d) If the Company shall issue, sell or otherwise distribute (whether
directly or otherwise) any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Shares are issuable upon such conversion or exchange (determined
by dividing (i) the aggregate amount received or receivable by the Company as
consideration for the issue, sale or distribution of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total maximum number of Shares issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Exercise Price per share of
outstanding Shares on the date of such issue, sale or distribution (before
giving effect to such issue, sale or distribution), then, for purposes of
paragraph (a) above, the total maximum number of Shares issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued as of the date of the issue, sale or distribution of such Convertible
Securities and thereafter shall be deemed to have received as consideration such
price per share, determined as provided above, therefor. Except as otherwise
provided in paragraph (e) below, no additional adjustment of the Exercise Price
shall be made upon the actual conversion or exchange of such Convertible
Securities.
-7-
(e) If the purchase price provided for in any Option referred
to in paragraph (c) above, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
paragraph (c) or (d) above, or the rate at which any Convertible Securities
referred to in paragraph (c) or (d) above are convertible into or exchangeable
for Shares shall change at any time (other than under or by reason of provisions
designed to protect against dilution upon an event which results in a related
adjustment pursuant to this Article IV), including the cancellation and/or
expiration or termination of the Options and/or Convertible Securities, the
Exercise Price then in effect shall forthwith be readjusted (effective only with
respect to any exercise of this Warrant after such readjustment) to the Exercise
Price which would then be in effect had the adjustment made upon the issue,
sale, distribution or grant of such Options or Convertible Securities been made
based upon such changed purchase price, additional consideration or conversion
rate, or in the event of the cancellation, termination or expiration of the
same, such adjustment shall be made to reflect as if such issuance had never
occurred, as the case may be; PROVIDED, HOWEVER, that such readjustment (other
than in the event of a cancellation, termination or expiration) shall give
effect to such change only with respect to such Options and Convertible
Securities as then remain outstanding.
(f) If the Company shall pay a dividend or make any other
distribution upon any capital stock of the Company payable in Shares, Options or
Convertible Securities, then, for purposes of paragraph (a) above, such Shares,
Options or Convertible Securities, as the case may be, shall be deemed to have
been issued or sold without consideration.
(g) If any Shares, Options or Convertible Securities shall be
issued, sold or distributed for cash, the consideration received therefor shall
be deemed to be the amount received by the Company therefor, after deduction
therefrom of any expenses incurred and any underwriting commission or
concessions paid or allowed by the Company in connection therewith. If any
Shares, Options or Convertible Securities shall be issued, sold or distributed
for a consideration other than cash, the amount of the consideration other than
cash received by the Company for purposes of this Section 4.03 shall be deemed
to be the Fair Market Value of such consideration, after deduction of any
expenses incurred and any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. If any Shares, Options or
Convertible Securities shall be issued in connection with any merger in which
the Company is the surviving corporation, the amount of consideration therefor
shall be deemed to be the Fair Market Value of such portion of the assets and
business of the nonsurviving corporation as shall be attributable to such
Shares, Option or Convertible Securities, as the case may be. If any Options
shall be issued in connection with the issue and sale of other securities of the
Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued without consideration.
-8-
Section 4.04 SPECIAL DIVIDENDS. If the Company shall issue or
distribute to any holders of Shares, evidences of indebtedness, any other
securities of the Company or any cash, property or other assets, and if such
issuance or distribution does not constitute (a) a cash dividend or distribution
out of surplus or net profits legally available therefor; (b) a Share
Reorganization; or (c) a Below Market Distribution (any such nonexcluded event
being herein called a "SPECIAL DIVIDEND"), then (i) the Exercise Price shall be
decreased, effective immediately after the record date at which the holders of
Shares are determined for purposes of such Special Dividend, to a price
determined by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the Exercise Price per share of outstanding Shares
on such record date less the then Fair Market Value of the evidences of
indebtedness, securities or property or other assets issued or distributed in
such Special Dividend with respect to one Share, and the denominator of which
shall be the Exercise Price per share on such record date, and (ii) the number
of Shares subject to purchase upon exercise of this Warrant shall be increased
to a number determined by multiplying the number of Shares subject to purchase
immediately before such Special Dividend by a fraction, the numerator of which
shall be the Exercise Price in effect immediately before such Special Dividend
and the denominator of which shall be the Exercise Price in effect immediately
after such Special Dividend.
Section 4.05 MERGER, CONSOLIDATION, ASSET SALE, CAPITAL REORGANIZATION.
If there shall be any consolidation or merger to which the Company is a party,
other than a consolidation or a merger in which the Company is a continuing
corporation and which does not result in any reclassification of, or change
(other than a Share Reorganization or a change in nominal value) in, outstanding
Shares, or any sale or conveyance of the property of the Company as an entirety
or substantially as an entirety (any such event being called a "CAPITAL
REORGANIZATION"), then, effective upon the effective date of such Capital
Reorganization, the Holder shall have the right to purchase, upon exercise of
this Warrant, the kind and amount of shares of stock and other securities and
property (including cash) which the Holder would have owned or have been
entitled to receive after such Capital Reorganization if this Warrant had been
exercised immediately prior to such Capital Reorganization and this Warrant
shall expire.
Section 4.06 CERTAIN OTHER EVENTS. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors of the Company, fairly protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions or would
violate applicable law, then such Board shall make such adjustments in the
application of such provisions (or if necessary make alternative provisions
including taking all reasonable efforts to amend the Company's organizational
documents), in accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of such Board, to protect such
purchase rights as aforesaid, but in no event shall any such adjustment have the
effect of increasing the Exercise Price or decreasing the number of Shares
subject to purchase upon exercise of this Warrant.
Section 4.07 ADJUSTMENT RULES.
(a) Any adjustments pursuant to this Article IV shall be made
successively whenever an event referred to herein shall occur.
-9-
(b) If the Company shall set a record date to determine the
holders of Shares for purposes of a Share Reorganization, Below Market
Distribution, Special Dividend or Capital Reorganization and shall legally
abandon such action prior to effecting such action, then no adjustment shall be
made pursuant to this Article IV in respect of such action.
(c) No adjustment of the Exercise Price or number of Warrant
Shares issuable upon exercise hereof shall be made in an amount less than 1% of
such Exercise Price or number of Warrant Shares so issuable upon exercise
hereof, respectively, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall amount to 1% or
more of such Exercise Price or number of Warrant Shares so issuable upon
exercise, respectively.
Section 4.08 PROCEEDING PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action which
may be reasonably necessary, including obtaining regulatory approvals or
exemptions, in order that the Company may thereafter validly and legally issue
as fully paid and nonassessable all Shares which the holders of Warrants are
entitled to receive upon exercise thereof.
Section 4.09 NOTICE OF ADJUSTMENT. Not less than 30 nor more than 90
days prior to the effective date or 15 days prior to the record date, as the
case may be, of any action which requires or might require an adjustment or
readjustment pursuant to this Article IV, the Company shall give notice to the
Holder of such event, describing such event in reasonable detail and specifying
the record date or effective date, as the case may be, and, if determinable, the
required adjustment and the computation thereof. If the required adjustment is
not determinable at the time of such notice, the Company shall give notice to
the Holder of such adjustment and computation promptly after such adjustment
becomes determinable.
ARTICLE V
PARTICIPATION IN REGISTERED OFFERINGS
Section 5.01 GENERALLY. If the Company is required to register or
proposes to register any of its shares or other equity securities for public
sale for cash under the Securities Act (other than on Forms S-4 or S-8 or
similar registration forms), at any time from and after the expiration of a
period of six (6) months after an IPO (as defined herein), it will at each such
time or times give written notice to Holder of its intention to do so. After the
Company's receipt of a written request from Holder, the Company shall use its
best efforts to cause to be included in such registration any Warrant Shares
held by Holder which Holder requested to be registered under the Securities Act
and any applicable state securities laws; provided, that if the managing
underwriter advises that less than all of the shares to be registered should be
offered for sale so as not materially and adversely to affect the price or
salability of the offering being registered by the Company, Holder (but not the
Company to the extent it desires to include shares for its own account) shall
reduce the number of its Warrant Shares to be included in the registration
statement as required by the underwriter to the extent requisite of all
prospective sellers of the securities proposed to be registered (other than the
Company) on a pro rata basis according to the amounts of securities proposed to
be registered by all prospective sellers to permit the sale or other disposition
(in accordance with the intended method of disposition thereof as aforesaid) by
the prospective seller or sellers of the securities so registered. In addition,
-10-
if the Company registers any of its shares or other equity securities for public
sale for cash in an IPO or in any registered offering during the six months
following an IPO and includes in such registration statement any shares to be
sold by a shareholder of the Company, Holder shall have the right to require the
Company to include in such registration statement and offering Holder Retained
Shares on a pro rata basis with the other selling stockholder(s) on the same
basis as is provided in the preceding sentence. The registration requested
pursuant to this Section 2(b) is referred to herein as the "Piggyback
Registration".
Section 5.02 OBLIGATIONS OF HOLDER. It shall be a condition precedent
to the obligation of the Company to register any Warrant Shares pursuant to this
Article V that Holder shall furnish to the Company such information regarding
the Warrant Shares held and other information concerning Holder as the Company
shall reasonably request and as shall be required in connection with the
registration statement to be filed by the Company. If after a registration
statement becomes effective the Company advises Holder that the Company
considers it appropriate to amend or supplement the applicable registration
statement, Holder shall suspend further sales of the Warrant Shares pursuant to
the registration statement until the Company advises Holder that such
registration statement has been amended or supplemented.
Section 5.03 REGISTRATION PROCEEDINGS. Whenever the Company is required
by the provisions of this Article V to effect the registration of the Warrant
Shares under the Securities Act, the Company shall:
(a) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective;
(b) Prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective;
(c) Furnish to Holder and to the underwriters of the
securities being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
Holder and such underwriters may reasonably request in order to facilitate the
public offering of such securities;
(d) Use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or "Blue Sky"
laws of such jurisdictions as Holder may reasonably request within twenty (20)
days following the original filing of such registration statement, except that
the Company shall not for any purpose be required to execute a general consent
to service of process or to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified;
(e) Notify Holder, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
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(f) Notify Holder promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information; and
(g) Prepare and promptly file with the SEC and promptly notify
Holder of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading. Notwithstanding any
provision herein to the contrary, the Company shall not be required to amend,
supplement, or update a prospectus contained in any registration statement if to
do so would result in an unduly burdensome expense to the Company.
Section 5.04 EXPENSES. With respect to the inclusion of the Warrant
Shares in a registration statement pursuant to this Section, all registration
expenses, fees, costs and expenses of and incidental to such registration,
inclusion and public offering in connection therewith shall be borne by the
Company; provided, however, that Holder shall bear its own professional fees and
a pro rata share of the underwriting discount and commissions. The fees, costs
and expenses of registration to be borne by the Company shall include, without
limitation, all registration, filing, printing expenses, fees and disbursements
of counsel and accountants for the Company, fees and disbursements of counsel
for the underwriter or underwriters of such securities (if the Company and/or
selling security holders are required to bear such fees and disbursements), and
all legal fees and disbursements and other expenses of complying with state
securities or "Blue Sky" laws of any jurisdiction in which the securities to be
offered are to be registered or qualified.
Section 5.05 INDEMNIFICATION OF THE COMPANY. Subject to the conditions
set forth below, in connection with any registration of the Warrant Shares
pursuant to this Section, Holder agrees to indemnify and hold harmless the
Company, any underwriter for the offering and each of their officers, directors
and agents and each other person, if any, who controls the Company or the
underwriter (each a "Company Indemnified Party"), within the meaning of Section
15 of the Securities Act, as follows:
(a) Against any and all losses, claims, damages and expenses
whatsoever (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending any litigation,
commenced or threatened) (collectively, "Claims") (including payments made in
settlement of litigation, if such settlement is effected with the written
consent of Holder) insofar as such Claims arise out of or are based upon any
untrue or alleged untrue statement of a material fact contained in any
preliminary prospectus (if used prior to the effective date of the registration
statement), the registration statement or the prospectus (as from time to time
amended and supplemented), or in any application filed under any Blue Sky Laws,
or arise out of or are based upon the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue or
alleged untrue statement of a material fact or such omission or alleged omission
was made in the preliminary prospectus, the registration statement or the
prospectus, or in such application solely upon and in conformity with written
information furnished by Holder pursuant to Section 5.02; and
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(b) In no case shall Holder be liable under this indemnity
agreement with respect to any Claim made against any Company Indemnified Party
unless Holder shall be notified, by letter or by facsimile confirmed by letter,
of any action commenced against such Company Indemnified Party, promptly after
such person shall have been served with the summons or other legal process
giving information as to the nature and basis of the Claim. The failure to so
notify Holder, if prejudicial in any material respect to Holder's ability to
defend such Claim, shall relieve Holder from its liability to the Company
Indemnified Party under this Article V to the extent of such prejudice. Holder
shall be entitled to participate at its own expense in the defense of any Claim,
but if Holder elects to assume the defense, such defense shall be conducted by
counsel chosen by it, provided such counsel is reasonably satisfactory to the
Company Indemnified Party. In the event Holder elects to assume the defense of
any such Claim and retain such counsel, the Company Indemnified Party, defendant
in the suit, shall, after the date such party is notified of such election, bear
the fees and expenses of any counsel thereafter retained by such party, as well
as any other expenses thereafter incurred by them in connection with the defense
thereof; provided, however, that if the Company Indemnified Party reasonably
believes that there may be available to such party any defense or counterclaim
different than those available to Holder or that representation of the Company
Indemnified Party by counsel for Holder presents a conflict of interest for such
counsel, then the Company Indemnified Party shall be entitled to defend such
suit with counsel of such party's own choosing and Holder shall bear the fees,
expenses and other costs of such separate counsel.
Section 5.06 INDEMNIFICATION OF HOLDER. Subject to the conditions set
forth below, in connection with any registration of the Warrant Shares pursuant
to this Section, the Company shall indemnify and defend Holder, any underwriter
for the offering and each of their respective officers, directors and agents,
and each other person, if any, who controls (within the meaning of the
Securities Act) Holder or any such underwriter (each an "Holder Indemnified
Party") and shall hold each Holder Indemnified Party harmless:
(a) From and against any and all Claims (including payments
made in settlement of litigation, if such settlement is effected with the
written consent of the Company) insofar as such Claims arise out of or are based
upon any untrue or alleged untrue statement of a material fact contained in any
preliminary prospectus (if used prior to the effective date of the registration
statement), the registration statement or the prospectus (as any of the
foregoing from time to time may be amended or supplemented), or in any
application filed under any Blue Sky Laws, or arise out of or are based upon the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but only to
the extent that such untrue or alleged untrue statement of a material fact or
such omission or alleged omission was made in the preliminary prospectus,
registration statement or prospectus or in such application; provided, however,
that the Company shall not be liable in any such case to the extent that such
Claim arises out of or is based upon an untrue statement or alleged untrue
statement contained in any preliminary prospectus, the registration statement or
the prospectus, or application in reliance upon and in conformity with written
information furnished to the Company by Holder pursuant to Section 5.02; and
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(b) In no case shall the Company be liable under this
indemnity agreement with respect to any Claim made against any Holder
Indemnified Party unless the Company is notified, by letter or by facsimile
confirmed by letter, of any action commenced against such Holder Indemnified
Party, promptly after such person shall have been served with the summons or
other legal process giving information as to the nature and basis of the Claim.
The failure to so notify the Company, if prejudicial in any material respect to
the Company's ability to defend such Claim, shall relieve the Company from its
liability to the Holder Indemnified Party under this Article V to the extent of
such prejudice. The Company shall be entitled to participate at its own expense
in the defense of any Claim, but if the Company elects to assume the defense,
such defense shall be conducted by counsel chosen by it, provided such counsel
is reasonably satisfactory to the Holder Indemnified Party. In the event Holder
elects to assume the defense of any such Claim and retain such counsel, the
Holder Indemnified Party, defendant in the suit, shall, after the date such
party is notified of such election, bear the fees and expenses of any counsel
thereafter retained by such party, as well as any other expenses thereafter
incurred by them in connection with the defense thereof; provided, however, that
if the Holder Indemnified Party reasonably believes that there may be available
to such party any defense or counterclaim different than those available to the
Company or that representation of the Holder Indemnified Party by counsel for
the Company represents a conflict of interest for such counsel, then the Holder
Indemnified Party shall be entitled to defend such suit with counsel of such
party's own choosing and Holder shall bear the fees, expenses and other costs of
such separate counsel.
Section 5.07 CONTRIBUTION. If the indemnification provided for in
Section 5.05 or 5.06 above is unavailable or insufficient to hold harmless a
Company Indemnified Party or an Holder Indemnified Party in respect of any Claim
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Claims in such proportion as is
appropriate to reflect the relative benefits received by the Company, Holder and
the underwriters from the offering or, if that allocation is not permitted by
applicable law, in such proportion as is appropriate to reflect not only their
relative benefits, but also their relative fault in connection with the
statements or omissions which resulted in such Claims. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnified party, on one
hand, or such indemnifying party, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. No person who has committed fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The amount paid or payable by an indemnified party as a
result of Claims shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.
Section 5.08 In no event shall the liability of Holder under Section
5.05 and 5.07 exceed the price received by Holder for the Warrant Shares sold in
the offering.
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ARTICLE VI
CERTAIN DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"BUSINESS DAYS" means each day in which banking institutions in New
York are not required or authorized by law or executive order to close.
"EXERCISE PRICE" means $0.25 subject to adjustment pursuant to Article
IV. "FAIR MARKET VALUE" means the fair market value in U.S. dollars of the
business, property or assets in question as determined in good faith by the
Company and the Holder, or, if such parties cannot agree as to valuation, either
party may submit such calculation for determination by a nationally-recognized
firm of independent certified public accountants ("ACCOUNTANTS") chosen in good
faith by the Company, which shall bear any expense, with the reasonable consent
of the Holder; PROVIDED that with respect to Shares, Fair Market Value shall
mean, if applicable, the average of the daily closing prices in U.S. dollars for
the Shares on the twenty (20) consecutive trading days before the day in
question. The closing price for each day shall be the last reported sales price
regular way or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way, in either case
on the principal exchange on which the Shares are listed or admitted to trading
or, if not listed or admitted to trading on any principal exchange, the closing
sale price of the Shares, or in case no reported sale takes place, the average
of the closing bid and asked prices, on any inter-dealer quotation system or any
comparable system, or if the Shares are not so quoted, the parties hereto agree
for the purposes of this Warrant that (i) the Fair Market Value of a Share at
the date hereof shall be deemed to be equal to the Exercise Price (prior to any
adjustment pursuant to Article IV) and, (ii) at any time in the future, the Fair
Market Value of a Share shall be as reasonably agreed by the Holder and the
Company; PROVIDED, if such parties cannot agree as to such valuation either
party may submit such calculation for determination by the Accountants, at the
Company's expense, for determination as promptly as practical. In addition, all
references in this Warrant to outstanding Shares shall mean outstanding on a
fully diluted basis.
ARTICLE VII
MISCELLANEOUS
Section 7.01 NOTICES. Any notice or other communication to be
given hereunder shall be in writing and shall be delivered by recognized
courier, telecopy or certified mail, return receipt requested, and shall be
conclusively deemed to have been received by a party hereto and to be effective
on the day on which delivered or telecopied to such party at its address set
forth below (or at such other address as such party shall specify to the other
parties hereto in writing), or, if sent by certified mail, on the third business
day after the day on which mailed, addressed to such party at such address. In
the case of the Holder, such notices and communications shall be addressed to
its address as shown on the books maintained by the Warrant Agency, unless the
Holder shall notify the Company and the Warrant Agency that notices and
communications should be sent to a different address, in which case such notices
and communications shall be sent to the address specified by the Holder, and in
either case a copy of such notices and communications shall be sent to
Xxxxxxxxx, Xxxxxx & Xxxxxx, 000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxx
Xxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxxx, Esq., Fax: (000) 000-0000. In the
case of the Company, such notices and communications shall be addressed as
follows (until notice of a change is given as provided herein): Performance
Health Technologies, Inc., 000 Xxxxxxxxx Xxxxx, Xxxxxxx, XX 00000, Attention:
Xxxxxx Xxxxxxxx, President & CEO, Fax: (000) 000-0000.
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Section 7.02 WAIVERS; AMENDMENTS. No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Holder are cumulative and not exclusive of any rights
or remedies which it would otherwise have. The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and Holders holding a majority of Warrants at the time outstanding (or
any permitted transferee of all of the Warrant); PROVIDED, HOWEVER, that no such
amendment, modification or waiver shall, without the written consent of the
Holders of 51% of Warrants at the time outstanding, (a) change the number of
Shares subject to purchase upon exercise of this Warrant, the Exercise Price or
provisions for payment thereof or (b) amend, modify or waive the provisions of
this Section or Articles III or IV. Any such amendment, modification or waiver
effected pursuant to this Section shall be binding upon the Holders of all
Warrants and Warrant Shares, upon each future Holder thereof and upon the
Company. In the event of any such amendment, modification or waiver the Company
shall give prompt notice thereof to all Holders of Warrants and, if appropriate,
notation thereof shall be made on all Warrants thereafter surrendered for
registration of transfer or exchange. No notice or demand on the Company in any
case shall entitle the Company to any other or further notice or demand in
similar or other circumstances.
Section 7.03 GOVERNING LAW. This Warrant shall be construed in
accordance with and governed by the laws of the State of Delaware without regard
to choice of law doctrine.
Section 7.04 COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All covenants,
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
Section 7.05 SEVERABILITY. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
Section 7.06 SECTION HEADINGS. The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
Section 7.07 NO RIGHTS AS STOCKHOLDER. This Warrant shall not entitle
the Holder to any rights as a stockholder of the Company.
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Section 7.08 NO REQUIREMENT TO EXERCISE. Nothing contained in this
Warrant shall be construed as requiring the Holder to exercise this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and
attested by its Secretary or an Assistant Secretary, all as of the day and year
first above written.
PERFORMANCE HEALTH TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Attest:
---------------------------
Name:
---------------------------
Title:
---------------------------
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SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To: Performance Health Technologies, Inc. (the "Company")
The undersigned hereby irrevocably elects:
(i) to exercise the right of purchase represented by the
attached Warrant for, and to purchase thereunder, __________ Shares, as
provided for therein, and tenders herewith payment of the Exercise
Price in full in the form of certified or bank cashier's check or wire
transfer; or
(ii) the "cashless exercise" of its rights under the Section
1.01 of the attached Warrant with respect to ___________ Shares
otherwise available for purchase to it under the Warrant and receive
such number of Shares as provided in the formula set forth in such
Section 1.01.
Please issue a certificate or certificates for such Shares in the following name
or names and denominations:
--------------------------------------------------------------------------------
------------------------------------------------------------------------------ .
In connection with the exercise of the Warrant, the undersigned hereby
represents and warrants that:
(i) it recognizes that the Shares issuable pursuant to the attached
Warrant have not been registered under the Securities Act and may not be sold,
pledged or otherwise transferred except pursuant to the exceptions set forth on
the legend on such Shares which is also set forth in Section 1.04 of the
attached Warrant;
(ii) it has received all material information with respect to the
Company which it deems necessary with its decision to exercise the attached
Warrant and it has been given an opportunity to ask questions and receive
answers from representatives of the Company;
(iii) it is purchasing the Shares for its own account, for the purpose
of investment only, and not with a view towards the further resale or
distribution thereof; and
(iv) it is an "Accredited Investor" within the meaning of Rule 501 of
Regulation D under the Securities Act of 1933, as amended.
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If said number of Shares shall not be all the Shares issuable upon exercise of
the attached Warrant, a new Warrant is to be issued in the name of the
undersigned for the balance remaining of such Shares less any fraction of a
Share paid in cash.
NORTH COAST SECURITIES CORPORATION
By:
----------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
Dated: ____________________ NOTE: The above signatory should correspond
exactly with the name on the face of
the attached Warrant or with the name
of the assignee appearing in the
assignment form below.
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ASSIGNMENT
(To be executed upon assignment of Warrant)
For value received and in accordance with Section 2.03 of the attached Warrant,
____________________ hereby sells, assigns and transfers unto
___________________________ the attached Warrant, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
__________________ attorney to transfer said Warrant on the books of SportsTrac
Systems, Inc. with full power of substitution in the premises.
NORTH COAST SECURITIES CORPORATION
By:
----------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
Dated:____________________
NOTE: The above signatory should correspond
exactly with the name on the face of the
attached Warrant.
Consented to and approved in accordance with
Section 2.03 of the attached Warrant
PERFORMANCE HEALTH TECHNOLOGIES, INC.
By:
----------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
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