EXHIBIT 4.12
WARRANT TO PURCHASE COMMON STOCK
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED NEITHER THE WARRANT NOR THE SHARES MAY BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED. THIS WARRANT MUST BE SURRENDERED TO THE
COMPANY OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE
OR OTHER TRANSFER OF ANY INTEREST IN THIS WARRANT OR THE SHARES ISSUABLE
HEREUNDER.
Issuer: American HealthChoice, Inc.
Class of Stock: Common Stock
Issue Date: December 29, 2005
Expiration Date: December 29, 2008
THIS WARRANT TO PURCHASE COMMON STOCK is being issued pursuant to that
certain Securities Purchase Agreement dated as of the date hereof (the
"Purchase Agreement") between American HealthChoice, Inc., a New York
corporation (the "Company") and Golden Gate Investors, Inc. ("Holder").
Warrants. The Company hereby grants to Holder the right to purchase
3,000,000 shares of the Company's Common Stock (the "Shares" or "Warrant
Shares") at a price per share equal to the Exercise Price set forth in
section 2.4 below. This Warrant is exercisable concurrently with, and not
subsequent to, the issuance of a Conversion Notice under the Debenture. The
date that the Holder issues a Conversion Notice under the Debenture is
hereafter referred to as the "Conversion Date." Defined terms not defined
herein shall have the meanings ascribed to them in the Debenture or the
Securities Purchase Agreement.
Holder agrees that, beginning in the first full calendar month after the
Registration Statement is declared effective, Holder will exercise at least
5%, but no more than 10% (such 10% maximum amount to be cumulative from the
Deadline), of the Warrants per calendar month, provided that the Common
Shares are available, registered and freely tradable. If Holder exercises
more than 5% of the Warrants in any calendar month, the excess over 5% shall
be credited against the next month's minimum exercise amount. The 10%
monthly maximum amount shall not be applicable if the Current Market Price
of the Common Stock at anytime during the applicable month is higher than
the Current Market Price of the Common Stock on the Closing Date. In the
event Holder does not exercise at least 5% of the Warrants in any particular
calendar month, Holder shall not be entitled to collect interest on the
Debenture for that month if the Company gives Holder written notice, at
least 5 business days prior to the end of the month, of Holder's failure to
convert the minimum required amount for that month.
This Warrant shall expire and Holder shall no longer be able to purchase the
Warrant Shares on the Expiration Date.
EXERCISE
Method of Exercise. Holder may exercise this Warrant by delivering a duly
executed Warrant Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company.
Delivery of Certificate and New Warrant. As promptly as practicable after
the receipt of the Warrant Notice of Exercise, but in any event not more
than three (3) Business Days after the Company's receipt of the Warrant
Notice of Exercise, the Company shall issue the Shares and cause to be
mailed for delivery by overnight courier, or if a Registration Statement
covering the Shares has been declared effective by the SEC cause to be
electronically transferred, to Holder a certificate representing the Shares
acquired and, if this Warrant has not been fully exercised and has not
expired, a new Warrant substantially in the form of this Warrant
representing the right to acquire the portion of the Shares not so acquired.
Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in
the case of mutilation, or surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
Exercise Price. The Exercise Price of this Warrant shall be $1.09 per
Share.
ADJUSTMENT TO THE SHARES
The number of Shares purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
Reclassification. In case of any reclassification or change of outstanding
securities of the class issuable upon exercise of this Warrant then, and in
any such case, the Holder, upon the exercise hereof at any time after the
consummation of such reclassification or change, shall be entitled to
receive in lieu of each Share theretofore issuable upon exercise of this
Warrant, the kind and amount of shares of stock, other securities, money
and/or property received upon such reclassification or change by a holder of
one Share. The provisions of this Section 2.1 shall similarly apply to
successive reclassifications or changes.
Subdivision or Combination of Shares. If the Company at any time while this
Warrant remains outstanding and unexpired shall subdivide or combine its
Shares, the Exercise Price shall be proportionately decreased in the case of
a subdivision or increased in the case of a combination.
Stock Dividends. If the Company, at any time while this Warrant is
outstanding shall pay a dividend with respect to its Shares payable in
Shares, or make any other distribution of Shares with respect to Shares
(except any distribution specifically provided for in Section 2.1 and
Section 2.2 above), then the Exercise Price shall be adjusted, effective
from and after the date of determination of shareholders entitled to
received such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such date of
determination by a fraction, (a) the numerator of which shall be the total
number of Shares outstanding immediately prior to such dividend or
distribution, and (b) the denominator of which shall be the total number of
Shares outstanding immediately after such dividend or distribution.
Non-Cash Dividends. If the Company at any time while this Warrant is
outstanding shall pay a dividend with respect to Shares payable in
securities other than Shares or other non-cash property, or make any other
distribution of such securities or property with respect to Shares (except
any distribution specifically provided for in Section 2.1 and Section 2.2
above), then this Warrant shall represent the right to acquire upon exercise
of this Warrant such securities or property which a holder of Shares would
have been entitled to receive upon such dividend or distribution, without
the payment by the Holder of any additional consideration for such
securities or property.
Effect of Reorganization and Asset Sales. If any (i) reorganization or
reclassification of the Common Stock (ii) consolidation or merger of the
Company with or into another corporation, or (iii) sale or all or
substantially all of the Company's operating assets to another corporation
followed by a liquidation of the Company (any such transaction shall be
referred to herein as an "Event"), is effected in such a way that holders of
common Stock are entitled to receive securities and/or assets as a result
of their Common Stock ownership, the Holder, upon exercise of this Warrant,
shall be entitled to receive such shares of stock securities or assets which
the Holder would have received had it fully exercised this Warrant on or
prior the record date for such Event. The Company shall not merge into or
consolidate with another corporation or sell all of its assets to another
corporation for a consideration consisting primarily of securities of such
corporation, unless the successor or acquiring corporation, as the case may
be, shall expressly assume the due and punctual observance and performance
of each and every covenant and condition of this Warrant to be performed or
observed by the Company and all of the obligations and liabilities
hereunder, subject to such modification as shall be necessary to provide for
adjustments which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 2. The foregoing provisions shall
similarly apply to successive mergers, consolidations or sales of assets.
Adjustment of Number of Shares. Upon each adjustment in the Exercise Price,
the number of Shares shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Shares, purchasable
immediately prior to such adjustment by a fraction, the numerator of which
shall be the Exercise Price immediately prior to such adjustment and the
denominator of which shall be the Exercise Price immediately thereafter.
No Impairment. The Company shall not, by amendment of its articles of
incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed under this Warrant by the
Company, but shall at all times in good faith assist in carrying out all of
the provisions of this Warrant and in taking all such action as may be
reasonably necessary or appropriate to protect Holder's rights hereunder
against impairment. If the Company takes any action affecting its Common
Stock other than as described above that adversely affects Holder's rights
under this Warrant, the Exercise Price shall be adjusted downward and the
number of Shares issuable upon exercise of this Warrant shall be adjusted
upward in such a manner that the aggregate Exercise Price of this Warrant is
unchanged.
Fractional Shares. No fractional Shares shall be issuable upon the exercise
of this Warrant, and the number of Shares to be issued shall be rounded down
to the nearest whole Share.
Certificate as to Adjustments. Upon any adjustment of the Exercise Price,
the Company, at its expense, shall compute such adjustment and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Exercise Price in effect upon the date thereof and the series of adjustments
leading to such Exercise Price.
No Rights of Shareholders. This Warrant does not entitle Holder to any
voting rights or any other rights as a shareholder of the Company prior to
the exercise of Holder's right to purchase Shares as provided herein.
REPRESENTATIONS AND COVENANTS OF THE COMPANY
Representations and Warranties. The Company hereby represents and warrants
to Holder that all Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonasessable, and free of any
liens and encumbrances.
Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series
or other rights; (c) to effect any reclassification or recapitalization of
Common Stock; (d) to merge or consolidate with or into any other
corporation, or sell, lease, license, or convey all or substantially all of
its assets, or to liquidate, dissolve or wind up; or (e) offer holders of
registration rights the opportunity to participate in an underwritten public
offering of the Company's securities for cash, then, in connection with each
such event, the Company shall give Holder (1) at least 20 days prior written
notice of the date on which a record will be taken for such dividend,
distribution, or subscription rights (and specifying the date on which the
holders of Common Stock will be entitled thereto) or for determining rights
to vote, if any, in respect of the matters referred to in (c) and (d) above;
(2) in the case of the matters referred to in (c) and (d) above at least 20
days prior written notice of the date when the same will take place (and
specifying the date on which the holders of Common Stock will be entitled to
exchange their Common Stock for securities or other property deliverable
upon the occurrence of such event); and (3) in the case of the matter
referred to in (e) above, the same notice as is given to the holders of such
registration rights.
Information Rights. So long as Holder holds this Warrant and/or any of the
Shares, the Company shall deliver to Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of
the Company, (b) within ninety (90) days of their availability, the annual
audited financial statements of the Company certified by independent public
accountants of recognized standing, and (c) within forty-five (45) days
after the end of each fiscal quarter or each fiscal year, the Company's
quarterly, unaudited financial statements.
Reservation of Warrant Shares. The Company has reserved and will keep
available, out of the authorized and unissued shares of Common Stock, the
full number of shares sufficient to provide for the exercise of the rights
of purchase represented by this Warrant.
Registration Rights. If Holder exercises this Warrant and purchases some or
all of the Shares, Holder shall have the Registration Rights set forth in
that certain Registration Rights Agreement executed concurrently therewith.
REPRESENTATIONS AND COVENANTS OF THE HOLDER
Private Issue. Holder understands (i) that the Shares issuable upon
exercise of Holder's rights contained in the Warrant are not registered
under the Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by the Warrant will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on Holder's
representations set forth in this Article 5.
Financial Risk. Holder has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
investment and has the ability to bear the economic risks of its investment.
Risk of No Registration. Holder understands that if the Company does not
register with the Securities and Exchange Commission pursuant to Section 12
of the Act, or file reports pursuant to Section 15(d), of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the Act is not in effect when it desires to
sell (i) the right to purchase Shares pursuant to the Warrant, or (ii) the
Shares issuable upon exercise of the right to purchase, it may be required
to hold such securities for an indefinite period.
Accredited Investor. Holder is an "accredited investor," as such term is
defined in Regulation D promulgated pursuant to the Act.
MISCELLANEOUS
Term. This Warrant is exercisable, in whole or in part, at any time and
from time to time on or after the Conversion Date and on or before the
Expiration Date set forth above.
Compliance with Securities Laws on Transfer. This Warrant may not be
transferred or assigned in whole or in part without compliance with
applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is to an
affiliate of Holder.
Transfer Procedure. Holder shall have the right without the consent of the
Company to transfer or assign in whole or in part this Warrant and the
Shares issuable upon exercise of this Warrant. Holder agrees that unless
there is in effect a registration statement under the Act covering the
proposed transfer of all or part of this Warrant, prior to any such proposed
transfer the Holder shall give written notice thereof to the Company (a
"Transfer Notice"). Each Transfer Notice shall describe the manner and
circumstances of the proposed transfer in reasonable detail and, if the
company so requests, shall be accompanied by an opinion of legal counsel, in
a form reasonably satisfactory to the Company, to the effect that the
proposed transfer may be effected without registration under the Act;
provided that the Company will not require opinions of counsel for
transactions involving transfers to affiliates or pursuant to Rule 144
promulgated by the Securities and Exchange Commission under the act, except
in unusual circumstances.
Notices, etc. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered personally, or sent by
telecopier machine or by a nationally recognized overnight courier service,
and shall be deemed given when so delivered personally, or by telecopier
machine or overnight courier service as follows:
If to the Company, to:
American HealthChoice, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000-000
Xxxxxx Xxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Holder, to:
Golden Gate Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
or at such other address as the Company shall have furnished to the Holder.
Each such notice or other communication shall for all purposes of this
agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
five days after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed
as aforesaid.
Counterparts. This agreement may be executed in any number of counterparts,
each of which shall be enforceable against the parties actually executing
such counterparts, and all of which together shall constitute one
instrument. Facsimile execution shall be deemed originals.
Waiver. This Warrant and any term hereof may be changed, waived, discharged
or terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought.
Attorneys Fees. In the event of any dispute between the parties concerning
the terms and provisions of this Warrant, the party prevailing in such
dispute shall be entitled to collect from the other party all costs incurred
in such dispute, including reasonable attorneys fees.
Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of California, without
giving effect to its principles regarding conflicts of law. Each of the
parties hereto consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of San Diego or the state courts of
the State of California sitting in the City of San Diego in connection with
any dispute arising under this Warrant and hereby waives, to the maximum
extent permitted by law, any objection including any objection based on
forum non conveniens, to the bringing of any such proceeding in such
jurisdictions.
6.9 Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transactions hereby. Accordingly,
the Company acknowledges that the remedy at law for a breach of its
obligations under this Warrant will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Warrant, that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Warrant and to enforce specifically the terms
and provisions hereof, without the necessity of showing economic loss and
without any bond or other security being required.
IN WITNESS WHEREOF, the parties hereto have duly caused this Warrant to
Purchase Common Stock to be executed and delivered on the date first above
written.
American HealthChoice, Inc. Golden Gate Investors, Inc.
By: ___________________________ By: __________________________
Title: __________________________ Title: _________________________
APPENDIX 1
WARRANT NOTICE OF EXERCISE
--------------------------
1. The undersigned hereby elects to purchase _____ shares of the
Common Stock of American HealthChoice, Inc. pursuant to the terms of the
Warrant to Purchase Common Stock issued to Golden Gate Investors, Inc. on
December ___, 2005.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name as is specified
below:
Golden Gate Investors, Inc.
0000 Xxxxxxxx Xxx., Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
3. The undersigned makes the representations and covenants set forth
in Article 5 of the Warrant to Purchase Common Stock.
________________________________
(Signature)
________________________________
(Date)
