Exhibit 10.7
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OR CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT
WITH A VIEW TO THE DISTRIBUTION THEREOF, AND SUCH SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES OR X-XXXXXXX.XXX
(THE "COMPANY") RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE
COMPANY) STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT OR APPLICABLE STATE SECURITIES
LAWS.
x-XxxXxxx.xxx
Warrant to Purchase 2,400,000 Shares of Common Stock
Date of Grant: October 18, 2001
Void After October 18, 2006
x-XxxXxxx.xxx, a Nevada Corporation (the "COMPANY") hereby certifies
that, for value received, Xxxx X. Xxxxx (the "HOLDER") is the registered
holder of a warrant ("WARRANT") to subscribe for and purchase from the
Company, at the Warrant Price defined in Section 2 herein, two million four
hundred thousand (2,400,000) fully paid and non-assessable shares of the
Company's common stock. $0.001 par value per share (the "COMMON STOCK"), such
price and such number of shares being subject to adjustment upon occurrence
of the contingencies set forth in this Warrant ("WARRANT SHARES").
This Warrant is subject to the following terms and conditions:
1. TERM/VESTING OF WARRANT.
(a) Subject to Section 1(b) hereof, this Warrant may be exercised in
whole or in part at any time prior to the first to occur of the following:
(i) 5:00 p.m., Pacific Standard Time, October 18, 2006; or (ii) the
consummation of any transaction or series of transactions (collectively, the
"TRANSACTION"), including without limitation, the sale, transfer or
disposition of all or substantially all of the Company's assets or the merger
of the Company with or into, or consolidation with, any other corporation,
whereby the holders of the Company's voting securities prior to the
Transaction do not hold more than 50% of the voting securities of the
surviving entity following consummation of the Transaction (a "CHANGE OF
CONTROL").
Upon the occurrence of any of the events described in clause (i) above,
this Warrant, to the extent not exercised, shall terminate. Upon the occurrence
of any of the events described in clause (ii) above, this Warrant, to the extent
not otherwise exercisable or previously exercised, shall be deemed to have been
automatically become exercisable in full and converted pursuant to
Section 4 hereof and thereafter the Holder shall participate in the Transaction
on the same terms as other holders of Common Stock.
(b) This Warrant shall not be exercisable until 90 days after the
close of the Minimum Condition (as that term is defined in the Agreement and
Plan of Merger and Reorganization ("Merger Agreement") by and among the
Company, TLC Acquisition Corporation, and Tender Loving Care Health Care
Services, Inc. ("TLCS"); provided, however, if the Executive shall
voluntarily terminate employment with TLCS (other than for Good Reason) or if
the Executive is terminated for Cause (as such terms are defined in the
Employment Agreement dated October 18, 2001 by and between Holder and TLCS
("EMPLOYMENT AGREEMENT")) during the first twelve (12) months of the
Employment Agreement, the Executive shall immediately return to the Company a
number of shares equal to the Warrant Shares multiplied by a fraction, the
numerator of which shall be twelve (12) less the total number of full months
that have elapsed from the Effective Date (as such term is defined in the
Employment Agreement) and the date of termination and the denominator of
which shall be twelve (12).
2. WARRANT PRICE.
The exercise price of this Warrant (the "WARRANT PRICE") shall equal
$0.50 per share.
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
the surrender of this Warrant (with the notice of exercise form attached hereto
as Exhibit A duly executed) at the principal office of the Company and by the
payment to the Company of an amount equal to the Warrant Price multiplied by the
number of Warrant Shares then being purchased. The person or persons in whose
name(s) any certificate(s) representing shares of Common Stock are issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of Common Stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within 15
days after such exercise and, unless this Warrant has been fully exercised, the
portion of the Warrant Shares, if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the holder hereof as soon
as possible and in any event within such 15-day period.
4. RIGHT TO CONVERT WARRANT INTO COMMON STOCK; NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the rights of
a holder of this Warrant under the terms hereof, a holder shall have the right
to convert this Warrant or any portion thereof (the "CONVERSION RIGHT") into
shares of Common Stock as provided in this Section 4 at any time or from time to
time during the period during which this Warrant is exercisable pursuant to the
terms hereof. Upon exercise of the Conversion Right with respect to all or a
specified portion of shares subject to this Warrant (the "CONVERTED WARRANT
SHARES"), the Company shall deliver to the holder (without payment by the holder
of any
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exercise price or any cash or other consideration) that number of shares of
fully paid and nonassessable Common Stock equal to the quotient obtained by
dividing (x) the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in Section 4(b) below), which value shall be equal
to (A) the aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date less (B) the aggregate of the Warrant Price applicable to the
Converted Warrant Shares immediately prior to the exercise of the Conversion
Right by (y) the fair market value of one share of Common Stock on the
Conversion Date. Expressed as a formula, such conversion shall be computed as
follows:
X= A-B
---
Y
Where: X= the number of shares of Common Stock that may be
issued to the holder
Y= the fair market value (FMV) of one share of Common
Stock
A= the aggregate FMV (I.E., FMV x Converted Warrant
Shares)
B= the aggregate Warrant Price (I.E., Converted Warrant
Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of Section 4(a), shares
issued pursuant to the Conversion Right shall be treated as if they were issued
upon the exercise of this Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 4(a) hereof as
the Converted Warrant Shares), and the Warrant Price applicable thereto, in
exercise of the Conversion Right. Such conversion shall be effective upon
receipt by the Company of this Warrant together with the aforesaid written
statement, or on such later date as is specified therein (the "CONVERSION
DATE"). Certificates for the shares issuable upon exercise of the Conversion
Right and, if applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Conversion Date and
shall be delivered to the holder within 15 days following the Conversion Date
(c) DETERMINATION OF FAIR VALUE. For purposes of this Section 4, fair
market value of a Share and of a Converted Warrant Share as of a particular date
shall be determined as follows:
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(a) if such Share is then quoted on The American Stock Exchange,
any other national securities exchange, Nasdaq, or the OTC Bulletin
Board, the simple average of the closing sales prices as reported on
such exchange or market for the ten (10) consecutive trading days prior
to such date;
(b) if such share is publicly traded but is not quoted on The
American Stock Exchange, any other national securities exchange, Nasdaq
nor the OTC Bulletin Board, the value shall be the fair market value
thereof, as determined in good faith by the Board of Directors of the
Company.
5. STOCK FULLY PAID; RESERVATION OF SHARES. All Warrant Shares that may
be issued upon the exercise of the rights represented by this Warrant shall,
upon issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens, charges and pre-emptive rights
with respect to the issue thereof. The Company shall pay all transfer taxes, if
any, attributable to the issuance of the Warrant Shares upon the exercise of
this Warrant. Notwithstanding anything to the contrary herein, prior to the
issuance of any Warrant Shares to the Holder, the Company shall be entitled to
withhold any applicable taxes, including adjusting the number of Warrant Shares
issued to reflect such withholding. During the period within which the rights
represented by this Warrant may be exercised, the Company shall at all times
have authorized, and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant a sufficient number of shares of its
Common Stock to provide for the exercise of the rights represented by this
Warrant.
6. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES; LIMITATION ON
EXERCISE. The number and kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time in accordance with this Section 6; provided that, no such adjustment shall
be made if a corresponding adjustment is made pursuant to the Company's Articles
of Incorporation.
(a) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than as a result of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another corporation (other than a Change of Control as provided in Section
1(b) hereof), the Company, or such successor corporation, as the case may be,
shall execute a new Warrant, providing that the holder of this Warrant shall
have the right to exercise such new Warrant and procure upon such exercise in
lieu of each share of Common Stock theretofore issuable upon exercise of this
Warrant the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change, consolidation or merger
by a holder of one share of Common Stock. Such new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The provisions of this subsection
(a) shall similarly apply to successive reclassifications, changes,
consolidations and mergers.
(b) SUBDIVISION OR COMBINATION OF SHARES. If at any time on or after
the date of this Warrant the Company shall subdivide its outstanding shares of
Common Stock into a greater number of shares, the Warrant
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Price in effect immediately prior to such subdivision shall subdivide its
outstanding shares of Common Stock into a greater number of shares, the Warrant
Price in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares receivable upon exercise of the Warrant shall
be proportionately increased; and, conversely, if at any time on or after the
date of this Warrant the outstanding number of shares of Common Stock shall be
combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased and the
number of shares receivable upon exercise of the Warrant shall be
proportionately decreased.
(c) ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment in the Warrant
Price, the number of Shares of Common Stock purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Shares purchasable immediately prior to such adjustment in the Warrant
Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
7. FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value (as determined in accordance with Section 4(c) hereof) of a share of
Common Stock on the date of exercise.
8. NOTICES.
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, then, and in each such case, the Company, within thirty (30)
days thereafter, shall give written notice thereof to the registered holder of
this Warrant (the "NOTICE"). The Notice shall be mailed to the address of such
as shown on the books of the Company, and shall state the Warrant Price as
adjusted and the increased or decreased number of shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each.
(b) In the event that the Company shall propose at any time to effect a
Change of Control, the Company shall send to the Holder at least 15 days' prior
written notice of the date when the same shall take place.
(c) Each such written notice shall be given by first class mail,
postage prepaid, addressed to the Holder at the address as shown on the books of
the Company for the Holder.
9. RESTRICTIONS ON TRANSFER. Certificates representing any of the
Common Stock acquired pursuant to the provisions of this Warrant shall have
endorsed thereon legends substantially in the following form, as appropriate.
(a) Unless such shares of Common Stock are received in a transaction
registered under the Securities Act and qualified (if necessary) under
applicable state securities laws:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION UNLESS THE
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COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
(b) Any legend required to be placed thereon by any applicable state
securities laws.
10. VOLUME LIMITATIONS ON RESALE. In addition to any restrictions and
limitations imposed by applicable law on the resale of Warrant Shares, Xxxxxx
agrees that for a period of five (5) years following the earliest to occur of
either of the events described in Section 1(a) to refrain from selling any
Warrant Shares in excess of 50,000 shares per trading day, and in the event the
closing sales price of the Common Stock for any trading day is below $2.00 per
share, the Holder shall not sell more than 25,000 shares for the next immediate
trading day. Notwithstanding anything to the contrary herein, any sales shall be
subject to Rule 144 of the Securities Act of 1933, as amended, if applicable.
11. COMPLIANCE WITH ACT. The Holder, by acceptance hereof, agrees that
this Warrant and the Common Stock to be issued upon the exercise or conversion
hereof are being acquired solely for its own account and not as a nominee for
any other party and not with a view toward the resale or distribution thereof
and that it will not offer, sell or otherwise dispose of this Warrant or any of
the Common Stock to be issued upon the exercise or conversion hereof except in
accordance herewith and under circumstances which will not result in a violation
of the Securities Act or of applicable state securities laws.
12. REGISTRATION RIGHTS. Within 90 days after the close of the Minimum
Condition (as that term is defined in the Merger Agreement), the Company shall
file a registration statement under applicable securities laws regarding the
shares of Common Stock underlying the Warrant, to the extent required to permit
the disposition of such shares by Holder pursuant to such registration
statement. The Company shall use its best efforts to respond to any comments
received by it from applicable securities regulations. The Company shall cause
such registration statement to remain effective until the second anniversary of
the date on which all shares of Common Stock underlying the Warrant have been
exercised. The Company shall pay all reasonable expenses of Holder incurred in
connection with the registration of such shares, other than underwriting
discounts and commissions, if any, and applicable transfer or withholding taxes,
if any.
13. MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or assigns of the Company and of the holder or
holders hereof and of the Common Stock issued or issuable upon the exercise
hereof (including without limitation the estate, heirs or designated
beneficiaries of Holder).
(b) No holder of this Warrant, as such, shall be entitled to vote or
receive dividends or be deems to be a stockholder of the Company for any
purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a
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stockholder of the Company or any right to vote, give or withhold consent to any
corporate action, receive notice of meetings, receive dividends or subscription
rights, or otherwise.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Restated Certificate of
Incorporation or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against impairment.
(e) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or distribution, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrant, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
date and tenor.
(f) This Warrant shall be nontransferable, other than pursuant to (i) a
transfer not involving a change in beneficial ownership, and (ii) any transfer
by any Holder to (A) members of Xxxxxx's immediate family or their respective
ancestors or descendants or a trust, custodianship, partnership or fiduciary
account for the benefit of any such person or (B) any foundation organized for
charitable or not-for-profit purposes, in each case for clauses (A) and (B)
whether or not Holder maintains the power to direct any investment decisions.
Any transfer pursuant to this Section 13(f) shall be subject to the terms and
conditions of this Warrant and any applicable securities laws.
(g) This Warrant or any provision of this Warrant may be amended,
waived, discharged or terminated by a statement in writing signed by the party
against which enforcement of the amendment, waiver, discharge or termination is
sought.
(h) This Warrant shall be governed by the laws of the State of Nevada
X-XXXXXXX.XXX
By: /s/ Xxxxx Xxxxxxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxxxxxxx
Title: President and Co-CEO
Dated: October 18, 2001
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NOTICE OF EXERCISE
To: x-XxxXxxx.xxx
1. The undersigned hereby irrevocably elects to purchase ______ shares
of Common Stock of x-XxxXxxx.xxx pursuant to the terms of the attached Warrant
and tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned (or in such other name or names as are specified
below):
Name:__________________________________________________________________________
(Please print)
Address:_______________________________________________________________________
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
Signature:__________________________________
Date: __________________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and transfers unto
Name:________________________________________________________________________
(Please print)
Address:______________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
__________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ______________________ Attorney, to transfer
the same on the books of x-Xxxxxxx.xxx corporation with full power of
substitution in the premises.
Dated:__________________________
Signature:_____________________________________________________________________
Witness:______________________________________________________________________
(Signature must conform to the name of the holder of the Warrant.)
