Exhibit 10.8
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGIS-TERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES
PURCHASE AGREEMENT DATED AS OF MAY 30, 2006, NEITHER THIS WARRANT NOR
ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRA-TION STATEMENT FOR SUCH SECURITIES UNDER SAID
ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY
FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
REGULATION S UNDER SUCH ACT.
Right to
Purchase
13,950,000
Shares of
Common Stock,
par value $.001
per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, AJW Qualified Partners, LLC or its
registered assigns, is entitled to purchase from PEDIATRIC PROSTHETICS, INC., an
Idaho corporation (the "Company"), at any time or from time to time during the
period specified in Paragraph 2 hereof, 13,950,000 fully paid and nonassessable
shares of the Company's Common Stock, par value $.001 per share (the "Common
Stock"), at an exercise price per share equal to $.10 (the "Exercise Price").
The term "Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof. The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated May 30, 2006, by and among the Company and the Buyers
listed on the execution page thereof (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
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Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or offi-cial bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been deliv-ered, and payment shall have been made for such shares as
set forth above. Certifi-xxxxx for the Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding five (5)
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
shall be designated by such holder. If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. In addition to all other available remedies
at law or in equity, if the Company fails to deliver certificates for the
Warrant Shares within five (5) business days after this Warrant is exercised,
then the Company shall pay to the holder in cash a penalty (the "Penalty") equal
to 2% of the number of Warrant Shares that the holder is entitled to multiplied
by the Market Price (as hereinafter defined) for each day that the Company fails
to deliver certificates for the Warrant Shares. For example, if the holder is
entitled to 100,000 Warrant Shares and the Market Price is $2.00, then the
Company shall pay to the holder $4,000 for each day that the Company fails to
deliver certificates for the Warrant Shares. The Penalty shall be paid to the
holder by the fifth day of the month following the month in which it has
accrued.
Notwithstanding anything in this Warrant to the contrary, in no event shall
the holder of this Warrant be entitled to exercise a number of Warrants (or
portions thereof) in excess of the number of Warrants (or portions thereof) upon
exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Notes (as defined in the Securities
Purchase Agreement)) subject to a limitation on conversion or exercise analogous
to the limitation contained herein) and (ii) the number of shares of Common
Stock issuable upon exercise of the Warrants (or portions thereof) with respect
to which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein, the
limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from time
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to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 6:00 p.m.,
New York, New York time on the seventh (7th) anniversary of the date of issuance
(the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
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agrees as follows:
(A) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance in
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accordance with the terms of this Warrant, be validly issued, fully paid,
and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof.
(B) RESERVATION OF SHARES. During the Exercise Period, the Company
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shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a suf-ficient number of shares of
Common Stock to provide for the exercise of this Warrant.
(C) LISTING. The Company shall promptly secure the listing of the
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shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all shares
of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list on each national securities exchange
or automated quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company issuable upon
the exercise of this Warrant if and so long as any shares of the same class
shall be listed on such national securities exchange or automated quotation
system.
(D) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment of
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its charter or through any re-organi-zation, transfer of assets,
consolidation, mer-ger, 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 by it
hereunder, but will at all times in good faith assist in the carrying out
of all the provisions of this Warrant and in the taking of all such action
as may reasonably be requested by the holder of this Warrant in order to
protect the exercise privilege of the holder of this Warrant against
dilu-tion or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the general-ity of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then
in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(E) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
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entity succeeding to the Company by merger, consolidation, or acquisition
of all or sub-stantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price
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and the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.
(A) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE OF
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COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and 4(e)
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hereof, if and whenever on or after the date of issuance of this Warrant,
the Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share (before deduction of
reasonable expenses or commissions or underwriting discounts or allowances
in connection therewith) less than the Market Price on the date of issuance
(a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the sum of (x)
the number of shares of Common Stock actually outstanding immediately prior
to the Dilutive Issuance, plus (y) the quotient of the aggregate
consideration, calculated as set forth in Paragraph 4(b) hereof, received
by the Company upon such Dilutive Issuance divided by the Market Price in
effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding
(as defined below) immediately after the Dilutive Issuance.
(B) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
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determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(I) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner.
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issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common
Stock is issuable upon the exercise of such Options is less than the
Market Price on the date of issuance or grant of such Options, then
the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or
grant of such Options, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the
Company as consideration for the issuance or granting of all such
Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all
such Options, plus, in the case of Convertible Securities issuable
upon the exercise of such Options, the minimum aggregate amount of
additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable).
No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities issuable
upon exercise of such Options.
(II) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
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manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon
the exercise of Options) and the price per share for which Common
Stock is issuable upon such conversion or exchange is less than the
Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of
such Convertible Securities, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment to
the Exercise Price will be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible
Securities.
(III) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
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change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange of any Convertible Securities; or
(iii) the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock (other than under or by reason
of provisions designed to protect against dilution), the Exercise
Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold.
(IV) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
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SECURITIES. If, in any case, the total number of shares of Common
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Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued and the
rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the Exercise
Price then in effect will be readjusted to the Exercise Price which
would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
(V) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
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Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant
will be the amount received by the Company therefor, before deduction
of reasonable commissions, underwriting discounts or allowances or
other reasonable expenses paid or incurred by the Company in
connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof
as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving
corporation, the amount of consideration therefor will be deemed to be
the fair value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock,
Options or Convertible Securities, as the case may be. The fair value
of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(VI) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment to
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the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on
the date of issuance of this Warrant; (ii) upon the grant or exercise
of any stock or options which may hereafter be granted or exercised
under any employee benefit plan, stock option plan or restricted stock
plan of the Company now existing or to be implemented in the future,
so long as the issuance of such stock or options is approved by a
majority of the independent members of the Board of Directors of the
Company or a majority of the members of a committee of independent
directors established for such purpose; or (iii) upon the exercise of
the Warrants.
(C) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any
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time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date
of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced. If
the Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of record for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionately increased.
(D) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
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Exercise Price pursuant to the provisions of this Paragraph 4, the number
of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common
Stock issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise
Price.
(E) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of the
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Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of
the Company other than in connection with a plan of complete liquidation of
the Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this
Warrant in lieu of the shares of Common Stock immediately theretofore
acquirable upon the exercise of this Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such
consolidation, merger or sale or conveyance not taken place. In any such
case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities
thereafter deliverable upon the exercise of this Warrant. The Company will
not effect any consolidation, merger or sale or conveyance unless prior to
the consummation thereof, the successor corporation (if other than the
Company) assumes by written instrument the obligations under this Paragraph
4 and the obligations to deliver to the holder of this Warrant such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
(F) DISTRIBUTION OF ASSETS. In case the Company shall declare or make
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any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining shareholders
entitled to such distribution, but prior to the date of distribution, the
holder of this Warrant shall be entitled upon exercise of this Warrant for
the purchase of any or all of the shares of Common Stock subject hereto, to
receive the amount of such assets which would have been payable to the
holder had such holder been the holder of such shares of Common Stock on
the record date for the determination of shareholders entitled to such
distribution.
(G) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case,
the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and
the increase or decrease in the number of Warrant Shares purchasable at
such price upon exercise, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Such
calculation shall be certified by the Chief Financial Officer of the
Company.
(H) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be
made, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to not less
than 1% of such Exercise Price.
(I) NO FRACTIONAL SHARES. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.
(J) OTHER NOTICES. In case at any time:
(I) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained
earnings) to the holders of the Common Stock;
(II) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any
class or other rights;
(III) there shall be any capital reorganiza-tion of the Company,
or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substan-tially all its
assets to, another corporation or entity; or
(IV) there shall be a voluntary or involun-tary dissolution,
liquidation or winding up of the Company;
then, in each such case, the Company shall give to the holder of this
Warrant (a) notice of the date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common
Stock entitled to receive any such divi-dend, distribution, or subscription
rights or for determining the holders of Common Stock entitled to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of
any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, notice of the date (or, if not then
known, a reasonable approximation thereof by the Company) when the same
shall take place. Such notice shall also specify the date on which the
holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for
stock or other securities or property deliverable upon such reorganization,
re-classification, consolidation, merger, sale, dissolution, liquidation,
or winding-up, as the case may be. Such notice shall be given at least 30
days prior to the record date or the date on which the Company's books are
closed in respect thereto. Failure to give any such notice or any defect
therein shall not affect the validity of the proceedings referred to in
clauses (i), (ii), (iii) and (iv) above.
(K) CERTAIN EVENTS. If any event occurs of the type contemplated by
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the adjustment provisions of this Paragraph 4 but not expressly provided
for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors
will make an appropriate adjustment in the Exercise Price and the number of
shares of Common Stock acquirable upon exercise of this Warrant so that the
rights of the holder shall be neither enhanced nor diminished by such
event.
(L) CERTAIN DEFINITIONS.
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(I) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
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shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) pursuant
to Paragraph 4(b)(i) hereof, the maximum total number of shares of
Common Stock issuable upon the exercise of Options, as of the date of
such issuance or grant of such Options, if any, and (y) pursuant to
Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible
Securities, as of the date of issuance of such Convertible Securities,
if any.
(II) "MARKET PRICE," as of any date, (i) means the average of the
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last reported sale prices for the shares of Common Stock on the OTCBB
for the five (5) Trading Days immediately preceding such date as
reported by Bloomberg, or (ii) if the OTCBB is not the principal
trading market for the shares of Common Stock, the average of the last
reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (iii) if
market value cannot be calculated as of such date on any of the
foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of
the Company or, at the option of a majority-in-interest of the holders
of the outstanding Warrants by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses similar
to the business of the corporation. The manner of determining the
Market Price of the Common Stock set forth in the foregoing definition
shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(III) "COMMON STOCK," for purposes of this Paragraph 4, includes
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the Common Stock, par value $.001 per share, and any additional class
of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable
pursuant to this Warrant shall include only shares of Common Stock,
par value $.001 per share, in respect of which this Warrant is
exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character
referred to in Paragraph 4(e) hereof, the stock or other securities or
property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
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exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
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entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
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(A) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
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the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form
attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, pro-vided, however, that any transfer or assignment
shall be subject to the conditions set forth in Paragraph 7(f) hereof and
to the applicable provisions of the Securities Purchase Agreement. Until
due presentment for registration of transfer on the books of the Company,
the Company may treat the registered holder hereof as the owner and holder
hereof for all purposes, and the Company shall not be affected by any
notice to the con-trary. Notwithstanding anything to the contrary contained
herein, the registration rights described in Paragraph 8 are assignable
only in accordance with the provisions of that certain Registration Rights
Agreement, dated May 30, 2006, by and among the Company and the other
signatories thereto (the "Registration Rights Agreement").
(B) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINA-TIONS. This Warrant is
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exchange-able, upon the surrender hereof by the holder hereof at the office
or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase
the number of shares of Common Stock which may be purchased hereunder, each
of such new Warrants to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(C) REPLACEMENT OF WARRANT. Upon receipt of evi-dence reasonably
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satisfactory to the Company of the loss, theft, destruction, or mutilation
of this Warrant and, in the case of any such loss, theft, or destruc-tion,
upon delivery of an indemnity agreement reason-ably satisfactory in form
and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense,
will execute and deliver, in lieu thereof, a new Warrant of like tenor.
(D) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
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Warrant in connection with any trans-fer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by
the Company. The Company shall pay all taxes (other than securities
transfer taxes) and all other expenses (other than legal expenses, if any,
incurred by the holder or transferees) and charges payable in connection
with the preparation, execution, and delivery of Warrants pursuant to this
Paragraph 7.
(E) REGISTER. The Company shall maintain, at its principal executive
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offices (or such other office or agency of the Company as it may designate
by notice to the holder hereof), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.
(F) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of the
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surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise,
the Warrant Shares issuable hereunder), shall not be registered under the
Securities Act of 1933, as amended (the "Securities Act") and under
applicable state securities or blue sky laws, the Company may require, as a
condition of allowing such exercise, transfer, or exchange, (i) that the
holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel, which opinion and counsel are
acceptable to the Company, to the effect that such exercise, transfer, or
exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or
transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter or status as an
"accredited investor" shall be required in connection with a transfer
pursuant to Rule 144 under the Securities Act. The first holder of this
Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment and not with a view to
the distribution thereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
--------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. NOTICES. All notices, requests, and other communications required or
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permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 00000 Xxxxxxxxxxx Xxxxx,
Xxxxxxx, XX 00000, Attention: Chief Executive Officer, facsimile No: [ ], or at
such other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to re-ceive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
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CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
11. MISCELLANEOUS.
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(A) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder
hereof.
(B) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are in-serted for purposes of reference only,
and - shall not affect the meaning or construction of any of the provisions
hereof.
(C) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration
statement under the Securities Act, this Warrant may be exercised by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the holder's intention to effect
a cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms
hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the holder shall surrender this
Warrant for that number of shares of Common Stock determined by multiplying
the number of Warrant Shares to which it would otherwise be entitled by a
fraction, the numerator of which shall be the difference between the then
current Market Price per share of the Common Stock and the Exercise Price,
and the denominator of which shall be the then current Market Price per
share of Common Stock. For example, if the holder is exercising 100,000
Warrants with a per Warrant exercise price of $0.75 per share through a
cashless exercise when the Common Stock's current Market Price per share is
$2.00 per share, then upon such Cashless Exercise the holder will receive
62,500 shares of Common Stock.
(D) 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 transaction contemplated 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 thereof, without the necessity of showing economic loss and
without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
PEDIATRIC PROSTHETICS, INC.
By: /s/ Xxxxx Xxxxxxx-Xxxx
-------------------------
Xxxxx Xxxxxxx-Xxxx
Chief Executive Officer
Dated as of May 30, 2006
FORM OF EXERCISE AGREEMENT
Dated: , 200
------------ ---
To:
---------------------
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase shares of Common Stock covered by
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such Warrant, and makes pay-ment herewith in full therefor at the price per
share provided by such Warrant in cash or by certified or official bank check in
the amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $ . Please issue a certificate or certifi-xxxxx for
---------
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
---------------------------
Signature:
Address:
------------------------
------------------------
Note: The above signature
should correspond exactly with
the name on the face of the
within Warrant, if applicable.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any frac-tion of a share paid in cash.
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints
------------------------------
as agent and attorney-in-fact to trans-fer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: ________ __, 200_
In the presence of: ------------------------------
Name:
------------------------------------------------
Signature:
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Title of Signing Officer or Agent (if any):
------------------------------
Address:
------------------------------
------------------------------
Note: The above signature should
correspond exactly with the name on the
face of the within Warrant, if
applicable.
