EXHIBIT 10
SUBSCRIPTION AND PURCHASE AGREEMENT
THIS SUBSCRIPTION AND PURCHASE AGREEMENT (the "Agreement") dated as of
the 14th day of November, 1996 by and between HEALTHWATCH, INC., a Minnesota
corporation (the "Company"), and _______________ (the "Investor"). Investor and
other investors purchasing Units (as defined herein) pursuant to similar
Subscription and Purchase Agreements are herein referred to collectively as
"Investors."
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the Company and the
Investor mutually agree as follows:
ARTICLE 1
DESCRIPTION OF FINANCING
1.1 AUTHORIZATION OF THE UNITS. The Company has authorized the issuance
and sale of 500,000 Units (the "Units"), each Unit consisting of one share of
Series B Convertible Preferred Stock which has the rights, preferences and
obligations as set forth in the Certificate of Designation of Series B
Convertible Preferred Stock attached hereto as Exhibit A (the "Series B Stock"),
and three common stock purchase warrants (the "Warrants") which are in
substantially the form of Exhibit B. The Series B Stock, Warrants and shares of
the Company's common stock issuable upon conversion of the Series B Stock and
the exercise of the Warrants (the "Common Stock") are sometimes referred to
herein as the "Securities."
1.2 PURCHASE AND SALE OF THE UNITS. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties
contained herein, the Company agrees to sell to Investor, and Investor agrees to
purchase the Units subscribed for in Section 10.1.
1.3 CLOSINGS. Closings of the purchase and sale of the Units shall take
place by mail or facsimile on November 14, 1996, January 15, 1997 and March 15,
1997. At the Closings, the Company shall deliver to Investors the shares of
Series B Stock and the Warrants representing the Units being purchased by each
Investor registered in the name of the Investor, against delivery to the Company
by the Investor of a certified or cashier's check or other form of payment
acceptable to the Company in the amount of the purchase price of the Units
subscribed for in Section 10.1 below. At the first Closing, 200,000 Units shall
be purchased, and at each of the second and third Closings, 150,000 Units shall
be purchased.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors that:
2.1 MISLEADING STATEMENTS; BALANCE SHEET AND CAPITALIZATION. No
representation or warranty by the Company in this Agreement or in any written
statement or certificate furnished or to be furnished to the Investor pursuant
to this Agreement or in connection with the transactions contemplated by this
Agreement, when taken together, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements therein made not misleading. A copy of the Company's Annual
Report Form 10-KSB) for the fiscal year ended June 30, 1996 has previously been
provided to Investors.
2.2 DISCLOSURE. The Company has fully provided Investors with all the
information which Investors have requested for deciding whether to purchase the
Units, and all information which the Company reasonably believes is necessary to
enable the Investors to make an informed decision.
2.3 BINDING OBLIGATION. This Agreement and each additional agreement
expressly contemplated by this Agreement, constitute a valid and legally binding
obligation of the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Investor represents and warrants that:
3.1 HIGH RISK INVESTMENT. The Investor is aware that investment in the
Units and the Common Stock involves substantial risks. The Investor represents
that Investor understands that an investment in this Offering should be
considered only by a person able to withstand a total loss of such investment.
3.2 BINDING OBLIGATION. This Agreement and each additional agreement
expressly contemplated by this Agreement, constitute a valid and legally binding
obligation of the Investor.
3.3 NASD MATTERS. Neither the Investor nor any corporation or
organization of which Investor is an officer or partner, any corporation or
organization of which Investor, directly or indirectly, is the beneficial owner
of 10% or more of any class of equity securities, any trust or other estate in
which Investor has a substantial beneficial interest or as to which Investor
serves as trustee or in a similar fiduciary capacity or, Investor's spouse, or
any relative of Investor, or any relative of Investor's spouse, who has the same
home as Investor is a member of the National Association of Securities Dealers,
Inc. ("NASD"), is affiliated with a member of the NASD or is a person associated
with a member of the NASD, it being understood that affiliation or association
includes ownership of 5% or more of the equity securities of any such member,
except as indicated on Exhibit C hereto.
ARTICLE 4
FEDERAL AND OTHER SECURITIES LAWS
4.1 INVESTMENT REPRESENTATIONS AND WARRANTIES. Investor further
represents and warrants that:
(a) Investment Experience. The Investor represents that
Investor is an "accredited investor" as defined in Regulation D
promulgated by the Securities and Exchange Commission and is
experienced in evaluating and extending financing to companies such as
the Company, has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
the investment, and has the ability to bear the economic risks of the
investment and to make an informed investment decision with respect
thereto. The Investor further represents that Investor has had, during
the course of the transaction and prior to the purchase of the Units,
the opportunity to ask questions of and receive answers from, the
Company concerning the terms and conditions of the Offering and to
obtain additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to or to
which Investor had access.
(b) Acquisition for Investment for Investor's Own Account.
This Agreement is made with the Investor in reliance upon Investor's
representation to the Company, which by its acceptance hereof the
Investor hereby confirms and which by acceptance of any of the
Securities, the Holder thereof shall also confirm, that the Units are
being and the Common Stock will be, unless such securities have been
registered pursuant to the Securities Act of 1933, as amended (the
"1933 Act"), and applicable state blue sky laws, acquired for
investment for Investor's own account, not as a nominee or agent and
not with a view to the sale or distribution of any part thereof. Any
resales of the Securities will be in conformity with applicable law. By
executing this Agreement, Investor further represents that Investor
does not have any contract, undertaking, agreement, or arrangement with
any person in violation of any federal or state law to sell, transfer,
or grant participations to such person, or to any third person, with
respect to the Securities. Investor realizes that the basis for the
exemption from the registration requirements of the 1933 Act relied
upon by the Company in connection with the Offering, may not be present
if, notwithstanding such representation, the Investor has in mind
merely acquiring the Securities for a fixed or determinable period and
selling them in the future, and Investor hereby confirms the absence of
any such intention.
(c) Transfer or Disposition of Securities. The Investor
understands that the Securities may not be sold, transferred, or
otherwise disposed of without registration under the 1933 Act, and that
in the absence of an effective registration statement, such securities
must be held indefinitely. The Investor represents that, in the absence
of an effective registration statement, it will sell, transfer, or
otherwise dispose of such securities only in a manner consistent with
the representations set forth herein and in accordance with the
provisions of this Agreement.
4.2 CERTIFICATE LEGENDS. The Investor agrees that all certificates
evidencing the Securities shall bear a legend in substantially the following
form, and by which the Investor agrees to be bound:
THE SECURITY DESCRIBED HEREIN HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR UNDER THE
SECURITIES LAWS OF ANY STATE. NO SALE OR DISTRIBUTION OF THIS SECURITY
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND
APPLICABLE STATE BLUE SKY LAWS.
4.3 STOP TRANSFER INSTRUCTION. The Company shall make a notation
regarding the restrictions on transfer of the Securities in its stock books, and
the Company shall not be required to transfer on its books any of such
securities that have been sold or transferred in violation of any of the
provisions of this Agreement, or to treat as the owner of such securities any
transferee to whom such securities have been so transferred.
ARTICLE 5
CONDITIONS TO INVESTOR'S OBLIGATIONS AT THE CLOSING
The obligations of the Investor under Section 1.2 of this Agreement and
Investors pursuant to other similar agreements, are subject to the fulfillment
on or before the Closing of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. The
representations and warranties of the Company contained in Article 2 shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing.
5.2 PERFORMANCE. The Company shall have conformed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it on or before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of any state, that are required
in connection with the lawful issuance and sale of the Securities pursuant to
this Agreement shall have been duly obtained and shall be effective on and as of
the Closing.
5.4 DELIVERY OF CERTIFICATES. The Investor shall have received one or
more Series B Stock and Warrant certificates representing the Units which the
Investor is purchasing at the Closing.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under Section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions as to the Investor:
6.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING. The
representations and warranties of Investors contained in Articles 3 and 4 shall
be true on and as of the Closing with the same force and effect as if they had
been made at the Closing.
6.2 QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of any state that are required
in connection with the lawful issuance and sale of the Securities pursuant to
this Agreement shall have been duly obtained and shall be effective on and as of
the Closing.
6.3 PAYMENT OF PURCHASE PRICE. Investors shall have delivered to the
Company the total consideration for the Securities which the Investors are
purchasing at the Closing.
ARTICLE 7
SECURITIES
7.1 REGISTRATION AND TRANSFER OF SECURITIES.
(a) The Company shall, at all times while any Securities are
outstanding, act as the registrar of the Series B Stock and Warrants
and shall cause to be kept at its principal office in California, or in
such other place or places and by such other registrar or registrars,
if any, as the Company may designate, a register in which shall be
entered the names and addresses of the holders of the Securities
("Holders") and particulars of the Securities held by them respectively
and of all transfers of Securities. The name of the Holder shall be
noted on the certificates for the Securities by the Company or other
registrar.
(b) No transfer of Securities shall be valid unless made by
the Holder or his executors or administrators or other legal
representatives or his or their attorney duly appointed by an
instrument in writing in form and execution satisfactory to the
Company, upon compliance with the provisions of this Agreement and the
Series B Stock and Warrants, as the case may be, and such other
requirements as the Company and/or other registrar may reasonably
prescribe, and unless such transfer shall have been duly entered on the
appropriate register and/or noted on such Warrant by the Company or
other registrar. The person in whose name a Warrant is registered shall
be deemed to be the owner thereof.
7.2 EXCHANGES OF SECURITIES. Certificates for Series B Stock or
Warrants of any authorized denomination may be exchanged for certificates of any
other authorized denomination or denominations, any such exchange to be for
certificates of an equal amount, as requested by the Holders. Any exchange of
certificates may be made at the offices of the Company or at the offices of any
registrar where a register is maintained for the Securities pursuant to the
provisions of Section 7.1. Any Securities tendered for exchange together with a
sum sufficient to cover any tax or other governmental charge payable in
connection with the transfer shall be surrendered to the Company or appropriate
registrar and shall be canceled.
ARTICLE 8
REGISTRATION RIGHTS
8.1 REGISTRATION. The Company will promptly, upon request of Investors
holding 100,000 of the Units offered hereby, take all necessary steps to
register, or quality, under the 1993 Act and the securities laws of such states
as the Investors may reasonably request, the shares of Common Stock issuable
upon conversion of the Series B Stock and exercise of the Warrants, provided,
however, in each case, that the Company shall not for any purpose be required to
execute a general consent to service of process or to quality to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified. The
Company shall be obligated to prepare, file and cause to become effective only
three registration statements pursuant to this Section 8.1 and to pay all costs
and expenses associated with such registration statements as provided in Section
8.2. The Company shall keep effective and maintain any registration,
qualification, notification or approval specified in this Section 8.1 for a
period of up to one hundred eighty (180) days.
8.2 EXPENSES. With respect to the inclusion of securities in a
registration statement pursuant to Section 8.1, the Company shall bear the
following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, and legal fees and disbursements and other expenses of complying with
state securities laws of any jurisdictions in which the securities to be offered
are to be registered or qualified. Fees and disbursements of special counsel and
accountants for the Investors, underwriting discounts and commissions, and
transfer taxes for Investor and any other expenses relating to the sale of
securities by the Investors not expressly included above shall be borne by the
Investors.
8.3 INDEMNIFICATION. The Company hereby indemnifies the Investors and
the officers and directors, if any, who control any Investor, within the meaning
of Section 15 of the 1933 Act, against all losses, claims, damages, and
liabilities caused by (1) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (and as
amended or supplemented if the Company shall have furnished any amendments
thereof or supplements thereto), any Preliminary Prospectus or any state
securities law filings; (2) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading except insofar as such losses, claims, damages, or
liabilities are caused by any untrue statement or omission contained in
information furnished in writing to the Company by Investors expressly for use
therein; and each Investor by Investor's acceptance hereof severally agrees that
it will indemnity and hold harmless the Company, each of its officers who signs
such Registration Statement, and each person, if any, who controls the Company,
within the meaning of Section 15 of the 1933 Act, with respect to losses,
claims, damages, or liabilities which are caused by any untrue statement or
alleged untrue statement, omission or alleged omission contained in information
furnished in writing to the Company by such Holder expressly for use therein.
ARTICLE 9
MISCELLANEOUS
9.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the Company or the Investors, as the case may be.
9.2 ENTIRE AGREEMENT. This Agreement and the Exhibits hereto constitute
the entire agreement between the parties, and no party shall be liable or bound
to another party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
9.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
9.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.5 NOTICES. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery or seven (7) days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Company at 0000
Xxxxx Xxx, Xxxxx, Xxxxxxxxxx 00000, and to the Investor at the address specified
below or at such other address as a party may designate by ten (10) days'
advance written notice to the other parties.
9.6 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the offering, and each Investor shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement.
9.7 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provisions shall be excluded from
this Agreement, and the balance of this Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
9.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE 10
SUBSCRIPTION
10.1 SUBSCRIPTION AMOUNT. The undersigned hereby subscribes for the
number of Units set forth opposite undersigned's name (500,000 Units in the
aggregate for all Investors) and shall tender at the Closing on __________,
199_, a certified check or bank draft in the aggregate amount of $______________
($2.25 per Unit) payable to the Company in full payment for such subscription.
10.2 RESALE COMPLIANCE. The undersigned agrees to comply with the 1933
Act and the rules and regulations promulgated thereunder, and any other relevant
securities legislation and policies governing the purchase, holding and resale
of the Units subscribed for, including, without limitation, applicable state
Blue Sky laws.
Entered into this ____ day of November, 1996.
___________________________________
(Name) (Please Print)
___________________________________
(Signature)
___________________________________
(Mailing Address)
___________________________________
(Registration Instructions)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE __ DAY OF NOVEMBER
1996.
HEALTHWATCH, INC.
By: ___________________________________
Its___________________________
EXHIBIT A
CERTIFICATE OF THE DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF THE
SERIES B CONVERTIBLE PREFERRED STOCK OF
HEALTHWATCH, INC.
HealthWatch, Inc., hereinafter called the "Corporation", a corporation
organized and existing under the Minnesota Business Corporation Act does hereby
certify that, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation, as amended, of the Corporation, said Board of
Directors at a meeting duly called and held on November __, 1996, and at which a
quorum was at all times present, duly adopted a Resolution providing for the
issuance of a series of 500,000 shares of Series B Convertible Preferred Stock,
which Resolution is as follows:
"RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of this Corporation in accordance with the
provisions of its Articles of Incorporation, as amended, a series of Preferred
Stock of the Corporation be and it hereby is given the distinctive designation
of "Series B Convertible Preferred Stock" (hereinafter referred to as the
"Series B Stock"), said Series to consist of Five Hundred Thousand (500,000)
shares of the stated value of Two Dollars and Twenty-Five Cents ($2.25) per
share. The preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof shall be as
follows:
1. Dividends
(a) The holders of shares of Series B Stock shall be entitled to
receive dividends at the rate of $0.225 per share (as adjusted
for any stock dividends, combinations or splits with respect
to such shares) per annum, payable out of funds legally
available therefor. Such dividends shall commence upon
issuance and shall be payable when, as and if declared by the
Board of Directors, in preference to any dividend to any other
shares of Preferred Stock or Common Stock, and shall be
cumulative. Dividends shall be paid quarterly on June 30,
September 30, December 31 and March 31, commencing June 30,
1997, to holders of record as of the close of business five
business days before the dividend payment date.
(b) No dividends (other than those payable solely in the Common
Stock of the Corporation) shall be paid on any other shares of
Preferred Stock or Common Stock of the Corporation during any
fiscal year of the Corporation until dividends, combinations
or splits with respect to such shares) on the Series B Stock
shall have been paid or declared and set apart during that
fiscal year and any prior year in which dividends accumulated
but remain unpaid. Following any such payment or declaration,
the holders of any other shares of Preferred Stock and Common
Stock shall be entitled to receive dividends, payable out of
funds legally available therefor, when, as and if declared by
the Board of Directors.
(c) No right shall accrue to holders of shares of Series B Stock
by reason of the fact that dividends on said shares are not
declared in any prior year, nor shall any undeclared or unpaid
dividend bear or accrue any interest.
In the event the Corporation shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by the Corporation
or other persons, assets (excluding cash dividends) or options or rights to
purchase any such securities or evidences of indebtedness, then, in each such
case the holders of the Series B Stock shall be entitled to a proportionate
share of any such distribution as though the holders of the Series B Stock were
the holders of the number of shares of Common Stock of the Corporation into
which their shares of Series B Stock are convertible as of the record date fixed
for the determination of the holders of Common Stock of the Corporation entitled
to receive such distribution.
2. Liquidation Preference
(a) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders
of the Series B Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of any other
shares of Preferred Stock and Common Stock by reason of their
ownership thereof, the amount of $2.25 per share (as adjusted
for any stock dividends, combinations or splits with respect
to such shares), plus all accrued or declared but unpaid
dividends on such share for each shares of Series B Stock then
held by them. If upon the occurrence of such event, the assets
and funds thus distributed among the holders of the Series B
Preferred Stock shall be insufficient to permit the payment to
such holders of the full aforesaid preferential amount, then
the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among
the holders of the Series B Stock in proportion to the
preferential amount each such holder is otherwise entitled to
receive.
(b) After payment to the holders of the Series B Stock of the
amounts set forth in Section 2(a) above, and the payment to
the holders of any other series of Preferred Stock which may
hereafter be established by the Board of Directors of any
liquidation preferences for such additional series of
Preferred Stock, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall
be distributed among the holders of the Common Stock and the
Series B Stock and any other series of Preferred Stock which
may hereafter be established by the Board of Directors in
proportion to the shares of Common Stock then held by them and
the shares of Common Stock which they then have the right to
acquire upon conversion of the shares of Series B Stock and
any other series of Preferred Stock which may hereafter be
established by the Board of Directors then held by them.
(c) Whenever the distribution provided for in this Section 2 shall
be payable in securities or property other than cash, the
value of such distribution shall be the fair market value of
such securities or other property as determined in good faith
by the Board of Directors.
3. Voting Rights
Unless and except to the extent otherwise required by law, the holders
of the Series B Stock shall have no voting power; provided that if any dividends
on the Series B Stock declared by the Board of Directors in accordance with
Section 1 hereof have not been paid for a period of one year or more, the
holders of Series B Stock shall, until such dividends have been paid, be
entitled, with the holders of the Common Stock, voting as a class, to vote or
act by written consent for the election of directors, with the number of votes
per share of Series B Stock in such election to be equal to the number of shares
of Common Stock then issuable upon conversion of such Series B Stock. Unless and
except to the extent otherwise required by law, the holders of the Series B
Stock shall have no right to vote as a class with respect to any matter. Should
the Series B Stock be entitled to vote on any matter pursuant to a requirement
of law, each holder of such stock shall be entitled to one vote in respect to
each share of such stock held of record in respect to such matter, unless some
other vote is required by law.
4. Conversion of Series B Stock into Common Stock
(a) Subject to the provisions of this Section 4, the holder of
record of any share or shares of Series B Stock shall have the
right, at his option, at any time after issuance, to convert
each said share or shares of Series B Stock into three (3)
fully-paid and non-assessable shares of Common Stock, $.07 par
value (hereinafter referred to as "Common Stock), of the
Corporation. The Corporation shall not be required to issue
fractional shares in connection with the conversion of any of
the Series B Stock and shall, in lieu thereof, pay to the
holder requesting conversion, an amount equal to the value
(determined in accordance with the foregoing) of such
fractional share.
(b) Any holder of a share or shares of Series B Stock desiring to
convert such Series B Stock into Common Stock, shall surrender
the certificate or certificates representing the share or
shares of Series B Stock so to be converted, duly endorsed (if
required by the Corporation) to the Corporation or in blank,
at the office of any Transfer Agent for the Series B Stock (or
such other place as may be designated by the Corporation), and
shall give written notice to the Corporation at said office
that he elects to convert the same as provided above, and
setting forth the name or names (with the address or
addresses) in which the shares of Common Stock are to be
issued.
(c) Conversion of Series B Stock shall be subject to the following
additional terms and provisions:
(1) As promptly as practicable after the surrender for
conversion of any Series B Stock, the Corporation
shall deliver or cause to be delivered at the
principal office of the Transfer Agent for the Series
B Stock (or such other place as may be designated by
the Corporation), to or upon the written order of the
holder of such Series B Stock, certificates
representing the shares of Common Stock issuable upon
such conversion issued in such name or names as such
holder may direct. Shares of the Series B Stock shall
be deemed to have been converted as of the close of
business on the date of the surrender of the Series B
Stock for conversion, as provided above, and the
rights of the holders of such Series B Stock shall
cease at such time, and the person or persons in
whose name or names the certificates for such shares
are to be issued shall be treated for all purposes as
having become the record holder or holders of such
Common Stock at such time; provided, however, that
any such surrender on any date when the stock
transfer books of the Corporation shall be closed
shall constitute the person or persons in whose name
or names the certificate for such shares are to be
issued as the record holder or holders thereof for
all purposes at the close of business on the next
succeeding day on which such stock transfer books are
open.
(2) The Corporation shall make no payment or adjustment
on account of any dividends accrued on the shares of
Series B Stock surrendered for conversion.
(3) The Corporation shall at all times reserve and keep
available solely for the purpose of issuance upon
conversion of Series B Stock, as herein provided,
such number of shares of Common Stock as shall be
issuable upon the conversion of all outstanding
Series B Stock.
(d) The issuance of certificates for shares of Common Stock upon
conversion of the Series B Stock shall be made without charge
for any tax in respect of such issuance. However, if any
certificate is to be issued in a name other than that of the
holder of record of the Series B Stock so converted, the
person or persons requesting the issuance thereof shall pay to
the Corporation the amount of any tax which may be payable in
respect of any transfer involved in such issuance, or shall
establish to the satisfaction of the Corporation that such tax
has been paid or is not due and payable.
5. General
(a) Conversion adjustment. In the event that the Corporation shall
at any time prior to conversion either (a) subdivide the
outstanding shares of Common Stock into a greater number of
shares, (b) combine the outstanding shares of Common Stock
into a smaller number of shares, (c) change the outstanding
shares of Common Stock into the same or a given number of
shares of any other class or classes of stock, (d) declare on
or in respect of the Common Stock a dividend payable in shares
or other securities of the Corporation, then the holders of
the Series B Stock shall be entitled to receive the same
number of shares or other securities of the Corporation, or
shall be entitled to subscribe for and purchase at the same
price that the shares or securities are offered to holders of
Common Stock, the number of such shares or the amount of such
securities as will represent the same proportion of the
outstanding Common Stock prior to such increase or decrease as
they would have been entitled to receive or subscribe for, as
the case may be, had they been holders of the number of shares
of Common Stock into which their shares of Series B Stock were
convertible on the record date for any such dividend or
subscription. The Board of Directors shall determine what
adjustments shall be made in the Stated Value and in the
market prices for the Corporation's Common Stock in order to
appropriately reflect and account for any such change.
(b) Merger. In the event the Corporation at any time while any of
the shares of Series B Stock are outstanding shall be
consolidated with or merged into any other corporation or
corporations, or shall sell or lease all or substantially all
of its property and business as an entirety, lawful provision
shall be made as part of the terms of such consolidation,
merger, sale, or lease so that the holder of any shares of
Series B Stock may thereafter receive in lieu of such shares
of Common Stock otherwise issuable to him upon conversion of
his shares of Series B Stock, but at the conversion rate which
would otherwise be in effect at the time of conversion as
hereinbefore provided, the same kind and amount of securities
or assets as may be issuable, distributable, or payable upon
such consolidation, merger, sale, or lease, with respect to
shares of Common Stock of the Corporation. The Board of
Directors shall determine what adjustments shall be made in
the Stated Value and in the market prices for the
Corporation's Common Stock in order to appropriately reflect
and account for any such change.
(c) Nothing herein shall be deemed to require the Corporation in
the event of any such subdivision, combination,
reclassification, recapitalization, consolidation, merger or
sale of assets, or liquidation, dissolution or winding up, to
issue or distribute fractional interests in shares of capital
stock or any other security of the Corporation or another
issuer, and the Corporation may make such arrangements as the
Board of Directors of the Corporation shall approve with
respect to any such event for settlement in lieu of issuance
of a fractional interest in a share of capital stock or other
security of the Corporation or another issuer to any holder of
the Series B Stock.
(d) The shares of Series B Stock shall not be subject to the
operation of a purchase, retirement or sinking fund.
(e) The issuance of additional shares of Series B Stock shall not
be subject to any restrictions as to issuance, nor shall the
holders of the Series B Stock be entitled to any restriction
with respect to the issuance of shares of any other series of
the Corporation's Common Stock or Preferred Stock, or as to
the powers, preferences or rights of any such other series;
provided that no series of additional shares of Preferred
Stock shall have any liquidation or other similar rights in
preference to the Series B Stock."
IN WITNESS WHEREOF, I have hereunto subscribed my hand this _____ day
of November 1996.
HealthWatch, Inc.
By
Xxxxxxx X. Xxxxxxx
EXHIBIT B
SEE PARAGRAPH 8 FOR RESTRICTIONS ON THE TRANSFER OF THIS WARRANT
No. VW-___
Warrant
to Purchase _______ Shares
WARRANT TO PURCHASE SECURITIES OF
HEALTHWATCH, INC.
THIS CERTIFIES THAT for value received ____________ is entitled,
subject to the terms and conditions hereinafter set forth, to purchase from
HEALTHWATCH, INC., a Minnesota corporation (the "Company"), _____________ fully
paid and non-assessable shares of Common Stock of the Company (herein called the
"Common Stock"), upon presentation and surrender of this Warrant with the
Subscription Form duly executed, at the principal office of the Company or at
such other office as shall have theretofore been designated by the Company by
notice pursuant hereto and upon payment therefor of the Purchase Price, in
lawful money of the United States of America, determined as set forth below. The
term of this Warrant shall commence on the date hereof, and terminate, if not
exercised prior thereto, at 5:00 p.m. California Time, on November 14, 1998.
This Warrant is subject to the following terms and conditions:
1. The purchase rights represented by this Warrant are exercisable at
the option of the Holder, in whole at any time, or in part from time to time
(but not as to a fractional share of stock). In the case of the purchase of less
than all the securities purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender hereof and shall execute and deliver a new
Warrant of like tenor for the balance of the securities purchasable hereunder.
2. The purchase price for each security purchasable pursuant to the
exercise of this Warrant shall be Two Dollars ($2.00) per share to be acquired,
such price being sometimes hereinafter referred to as the "Base Purchase Price".
The Base Purchase Price and, from time to time, the number of securities subject
to purchase hereunder are subject to adjustment in certain circumstances
provided for below, and the Base Purchase Price, as it may be adjusted from time
to time, is hereinafter referred to as the "Purchase Price".
(a) In case the Company shall (i) pay a dividend in shares of
its capital stock (other than an issuance of shares of capital stock to
holders of Common Stock who have elected to receive a dividend in
shares in lieu of cash), (ii) subdivide its outstanding shares of
Common Stock, (iii) reduce, consolidate or combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue
by reclassification of its shares of Common Stock any shares of the
Company, the Purchase Price in effect immediately prior thereto shall
be adjusted to that amount determined by multiplying the Purchase Price
in effect immediately prior to such date by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on
such date before giving effect to such division, subdivision,
reduction, combination or consolidation or stock dividend and of which
the denominator shall be the number of shares of Common Stock after
giving effect thereto. Such adjustment shall be made successively
whenever any such effective date or record date shall occur. An
adjustment made pursuant to this subsection (a) shall become effective
retroactively, immediately after the record date in the case of a
dividend and shall become effective immediately after the effective
date in the case of a subdivision, reduction, consolidation,
combination or reclassification.
(b) If the Capital Stock of the Company shall be changed into
the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock dividend
provided for above, or a reorganization, merger, consolidation or sale
of substantially all of the Company's assets), then, and in each such
event, the Holder of this Warrant shall have the right thereafter to
purchase the kind and amount of shares of stock and other securities
and property receivable upon such reorganization, reclassification, or
other change which could have been purchased pursuant to the exercise
of this Warrant, as reasonably determined by the Company's board of
directors, immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided herein.
(c) If at any time or from time to time there shall be a
capital reorganization of the stock of the Company (other than a
subdivision, combination, reclassification or exchange of shares
provided for elsewhere herein) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or
substantially all of the Company's properties and assets to any other
person, then, as a part of such reorganization, merger, consolidation
or sale, provision shall be made as reasonably determined by the
Company's board of directors so that the Holder of this Warrant shall
thereafter be entitled to receive upon exercise of this Warrant, the
number of shares of stock or other securities or property of the
Company or of the successor corporation resulting from such merger or
consolidation or sale, to which a Holder of stock deliverable upon
exercise of this Warrant would have been entitled on such capital
reorganization, merger, consolidation or sale.
(d) The adjustments provided for herein are cumulative and
shall apply to successive divisions, subdivisions, reductions,
combinations, consolidations, issues, distributions or other events
contemplated herein resulting in any adjustment under the provisions of
this section, provided that, notwithstanding any other provision of
this section, no adjustment of the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price then in effect; provided, however, that
any adjustments which by reason of this subsection (d) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment.
(e) Upon each adjustment of the Purchase Price, the Company
shall give prompt written notice thereof addressed to the registered
Holder of this Warrant at the address of such Holders as shown on the
records of the Company, which notice shall state the Purchase Price
resulting from such adjustment and the increase or decrease, if any, in
the number of shares issuable upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
3. In case at any time:
(a) The Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(b) The Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(c) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(d) There shall be any capital reorganization, or
reclassification of the capital stock of the Company or consolidation
or merger of the Company with, or sales of all or substantially all of
its assets to, another corporation; or
(e) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, addressed to the Holder at the address of
such holder as shown on the books of the Company, of the date on which (1) the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (2) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
4. If any event occurs as to which, in the sole opinion of the Board of
Directors of the Company, the other provisions of this Warrant are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustment in the
application of such provisions as may be necessary, in the sole judgment of such
Board, in accordance with such essential intent and principles, to protect such
rights as aforesaid.
5. Exercise of this Warrant shall be made by the surrender hereof by
the Holder to the Company at its principal office together with (i) the attached
Subscription Form designating the number of shares of Common Stock being
purchased, (ii) a certified check or cash in payment for such shares and (iii) a
letter of transmittal setting forth the computation of the amount of said
payment. The Company shall thereafter promptly (in any event within seven (7)
business days after such exercise) issue certificates for securities of the
Company purchased at the Purchase Price in effect at the time of such exercise.
The Holder shall be deemed to be the record owner of such securities as of the
close of business on the date of such exercise. The Holder shall not be entitled
to receive a fractional share, but in lieu thereof the Company shall pay in cash
an amount equal to the market value of such fractional share if stock has a
market value, or if not, the book value of such fractional share. The Company
shall thereupon cancel this Warrant; and in the event that less than the entire
number of shares purchasable are purchased, shall issue a new Warrant for the
number not so purchased.
6. This Warrant shall be redeemable, in whole or in part, at the option
of the Company by resolution of its Board of Directors, at any time and from
time to time on or after November 14, 1996, and prior to any exercise thereof at
a redemption price in cash equal to $.50 per Warrant to be redeemed (the
"Redemption Price"). Not less than 30 nor more than 60 days prior to the date
fixed for redemption, a notice (the "Redemption Notice") specifying the time and
place thereof and the Redemption Price per Warrant to be redeemed shall be given
by mail to the holders of record of the Warrants selected for redemption at
their respective addresses as the same shall appear on the books of the Company.
The holders of the Warrants to be redeemed shall have the right to exercise such
Warrants at any time prior to any such redemption. Upon tender of the Redemption
Price in accordance with the Redemption Notice, the Warrants to be redeemed as
indicated in the Redemption Notice shall no longer be deemed to be outstanding
and the holders thereof shall have no claim against the Company, except the
right to receive the Redemption Price payable upon such redemption, without
interest, upon surrender (and endorsement, if required by the Company) of the
Warrant certificates.
7. The Company covenants and agrees that all shares which may be issued
upon the exercise of this Warrant will, upon issuance, be duly and validly
authorized and issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof. The Company further
covenants and agrees that during the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of the issue upon exercise of this Warrant a sufficient number of shares
of its securities to provide for such exercise.
8. (a) The Holder represents that he is acquiring this Warrant and, in
the absence of an effective registration statement under the Securities Act of
1933 (the "1933 Act") for the securities issuable hereunder, such securities for
the purpose of investment and not with a view to or for sale in connection with
any distribution thereof. The Holder and the holder of any securities issued
upon exercise hereof, by his acceptance hereof, agrees that he/she/it will
notify the Company in writing before selling or otherwise disposing of this
Warrant or any securities issued to him/her/it upon exercise hereof, describing
briefly the nature of any such sale or other disposition, and no such sale or
other disposition shall be made unless and until (i) the Company has received an
opinion of counsel reasonably acceptable to it that no registration (or
perfection of an exemption) under the 1933 Act is required with respect to such
sale or disposition (which opinion may be conditioned upon the transferee's
assuming the Holder's obligation under this paragraph 8) or (ii) an appropriate
registration statement with respect to such Warrant or such Common Stock, or
both, has been filed with the Securities and Exchange Commission (the
"Commission") and declared effective by the Commission. The Company may require
that this Warrant and certificates representing the securities issued upon
exercise hereof be stamped or imprinted with an appropriate legend reflecting
the foregoing restrictions. For the purposes of this paragraph 8, the term
"Securities" shall include this Warrant and the securities issued or issuable
upon the exercise hereof.
(b) The restrictions imposed by this paragraph 8 on the transfer of
the Securities shall terminate as to any portion of the Securities when:
(i) Such portion of the Securities shall have been effectively
registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or exemption; or
(ii) Written opinions to the effect that such a registration
is no longer required or necessary under any Federal or State law or
regulation of governmental authority shall have been received from
legal counsel for the Company and counsel for the holder of such
portion of the Securities; or, if a favorable opinion is obtained from
holder's counsel, and counsel for the Company declines to render such
an opinion, upon the holder's undertaking to indemnify the Company, on
terms satisfactory to the Company, against all liability or loss the
Company may sustain in connection with such transfer; or
Whenever the restrictions imposed by this paragraph 8 shall terminate,
as provided above, any holder of the Securities as to which such restrictions
shall have terminated shall be entitled to receive promptly from the Company,
without expense to him, a new certificate, not bearing the restrictive legend
referred to in clause (a) hereof.
9. The original Holder of this Warrant has certain registration rights
with respect to the Securities, as set forth in Article 8 of the Subscription
and Purchase Agreement between such Holder and the Company.
10. This Warrant is exchangeable, upon the surrender hereof by the
Holder at the principal office of the Company, for new warrants of like tenor
and date representing in the aggregate the right to purchase the number of
shares purchasable hereunder, each of such new Warrants to represent the right
to purchase such number of shares as shall be designated by said Holder at the
time of such surrender. Subject to paragraph 8 hereof, this Warrant and all
rights hereunder are transferable in whole or in part by the Holder, in person
or by duly authorized attorney, upon surrender of this Warrant duly endorsed, at
the principal office of the Company.
11. Upon the receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
12. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission:
(a) If to the Holder, at such address as may have been
furnished by such holder to the Company in writing; and
(b) If to the Company, at such address as may have been
furnished by the Company to the Holder of this Warrant in writing.
13. This Warrant shall be binding upon any successors or assigns of the
Company.
14. This Warrant shall be construed in accordance with and governed by
the laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered as of the date set forth below by one of its officers
thereunto duly authorized.
Dated: _______________, 1996.
HEALTHWATCH, INC.
By__________________________________________
Xxxxxxx X. Xxxxxxx, President
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for and to
purchase thereunder, __________ of the shares of Common Stock of HEALTHWATCH,
INC. to which such Warrant relates, and herewith makes payment of $___________
therefor, in cash or by certified check, and requests that the certificates for
such shares be issued in the name of, and be delivered to,_____________________
_______________________________, the address for which is set forth below the
signature of the undersigned.
Dated: _______________________________
_______________________________
(Signature)
_______________________________
_______________________________
(Address)
_______________________________
To be signed only upon transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________ the right to purchase _________ shares of Common Stock of
HEALTHWATCH, INC. to which the within Warrant relates and appoints ____________,
attorney, to transfer said right on the books of HEALTHWATCH, INC. with full
power of substitution in the premises.
Dated: _______________________________
_______________________________
(Signature)
_______________________________
_______________________________
(Address)
EXHIBIT C
NASD Affiliations
[INDICATE THAT THE INVESTOR HAS NO NASD
AFFILIATIONS OR DESCRIBE SUCH AFFILIATIONS IN DETAIL.]
