HEALTHWAREHOUSE.COM, INC. WARRANT TO PURCHASE 6,250,000 SHARES OF COMMON STOCK (SUBJECT TO ADJUSTMENT)
EXHIBIT
4.2
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE
OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE AFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
XXXXXXXXXXXXXXX.XXX,
INC.
WARRANT
TO PURCHASE
6,250,000
SHARES
OF
COMMON STOCK
(SUBJECT
TO ADJUSTMENT)
December
15, 2009
This
certifies that for value, HWH
Lending, LLC or its registered assigns (the “Holder”),
is entitled, subject to the terms set forth below, at any time from and after
the date hereof (the “Original Issuance
Date”) and before 5:00 p.m., Eastern Time, on December 15,
2014 (the fifth anniversary of the Original Issuance Date (the “Expiration
Date”), to purchase from Xxxxxxxxxxxxxxx.xxx, Inc., a
Delaware corporation (the “Company”),
6,250,000 shares
(subject to adjustment as described herein), of common stock, par value $0.001
per share, of the Company (the “Common
Stock”), upon surrender hereof, at the principal office of the Company
referred to below, with a duly executed subscription form in the form attached
hereto as Exhibit A
and simultaneous payment therefor in lawful, immediately available money of the
United States or otherwise as hereinafter provided, at an initial exercise price
per share of $0.08
(the “Purchase
Price”). The Purchase Price and the number of shares of Common Stock
issuable upon exercise of this Warrant are subject to adjustment as provided
below, and the term “Common
Stock” shall include, unless the context otherwise requires, the stock
and other securities and property at the time receivable upon the exercise of
this Warrant. The term “Warrants,”
as used herein, shall mean this Warrant and any other Warrants delivered in
substitution or exchange therefor as provided herein. This Warrant is
being issued to the Holder pursuant to that certain Loan and Security Agreement,
dated as of December 15, 2009, by and between the Company and the Holder (the
“Loan
Agreement”). All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Loan
Agreement.
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1.
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Exercise.
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A. This
Warrant may be exercised at any time or from time to time from and after the
Original Issuance Date and before 5:00 p.m., Eastern Time, on the
Expiration Date, on any Business Day, for the full number of shares of Common
Stock called for hereby, by surrendering it at the principal office of the
Company, at 000 Xxxxxxxx Xxxx., Xxxxxxxxxx, XX 00000, with the subscription form
duly executed, together with (i) payment in an amount equal to (a) the
number of shares of Common Stock called for on the face of this Warrant, as may
be adjusted in accordance with the terms of this Warrant multiplied by
(b) the then Purchase Price in effect at the time of exercise, or (ii) a
conversion notice in the form set forth on Schedule
I hereto indicating that the Holder has elected to exercise this Warrant
pursuant to the procedures set forth in Section
1.B below. Payment of the Purchase Price must be made by payment in
immediately available funds. This Warrant may be exercised for less than the
full number of shares of Common Stock at the time called for hereby, except that
the number of shares of Common Stock receivable upon the exercise of this
Warrant as a whole, and the sum payable upon the exercise of this Warrant as a
whole, shall be proportionately reduced. Upon a partial exercise of this Warrant
in accordance with the terms hereof, this Warrant shall be surrendered, and a
new Warrant of the same tenor and for the purchase of the number of such shares
not purchased upon such exercise shall be issued by the Company to Holder
without any charge therefor. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date.
Within three (3) Business Days after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, together with cash, in lieu of any fraction of a share, equal to such
fraction of the then Fair Market Value (as defined below) on the date of
exercise of one full share of Common Stock.
B. In
lieu of exercising this Warrant for cash pursuant to Section
1. A above, the Holder may elect to satisfy the Purchase Price by
exchanging the Warrant for a number of shares of Common Stock computed using the
following formula (such election being referred to herein as a “Net Issue
Exercise Election”):
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X
=
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Y(A-B)
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A
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Where
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X
=
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the
number of shares of Common Stock to be issued to the Holder pursuant to
this Section
1
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Y
=
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the
number of shares of Common Stock purchasable under this Warrant or, if
only a portion of this Warrant is being exercised, the portion of this
Warrant being exercised (at the date of such
calculation).
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A
=
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the
Fair Market Value of one share of the Common Stock (at the date of such
calculation).
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B
=
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the
Exercise Price per share of Common Stock (as adjusted to the date of such
calculation).
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“Fair Market
Value” shall mean, as of any date: (i) if shares of the Common Stock
are listed on a national securities exchange, the average of the closing prices
as reported for composite transactions during the five (5) consecutive trading
days preceding the trading day immediately prior to such date or, if no sale
occurred on a trading day, then the mean between the closing bid and asked
prices on such exchange on such trading day; (ii) if shares of Common Stock
are not so listed but are quoted on the Over-the-Counter Bulletin Board (the
“OTC
Bulletin Board”), the average of the highest reported bid and lowest
reported asked prices as reported by the OTC Bulletin Board or the National
Quotations Bureau, as the case may be, during the five (5) consecutive trading
days preceding the trading day immediately prior to such date; or (iii) if
the shares of the Common Stock are not then publicly traded, the fair market
price of the Common Stock as determined in good faith by a majority of the Board
of Directors of the Company.
2. Shares Fully Paid; Payment
of Taxes. All shares of Common Stock issued upon the exercise of a
Warrant shall be validly issued, fully paid and non-assessable, and the Company
shall pay all taxes and other governmental charges (other than income taxes to
the holder) that may be imposed in respect of the issue or delivery
thereof.
3. Transfer and
Exchange. This Warrant and all rights hereunder are transferable, in
whole or in part, on the books of the Company maintained for such purpose at its
principal office referred to above by Holder in person or by duly authorized
attorney, upon surrender of this Warrant together with a completed and executed
assignment form in the form attached as Exhibit B,
payment of any necessary transfer tax or other governmental charge imposed upon
such transfer and an opinion of counsel reasonably acceptable to the Company
stating that such transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended (the “1933
Act”). Upon any partial transfer, the Company will issue and deliver to
Holder a new Warrant or Warrants with respect to the shares of Common Stock not
so transferred. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that this Warrant when endorsed in blank shall be
deemed negotiable and that when this Warrant shall have been so endorsed, the
holder hereof may be treated by the Company and all other persons dealing with
this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented hereby, or to the transfer hereof on
the books of the Company, any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered Holder hereof
as the owner for all purposes.
This
Warrant is exchangeable at such office for Warrants for the same aggregate
number of shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares as the Holder shall designate at the time of such
exchange.
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4.
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Anti-Dilution
Provisions.
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A. Adjustment for Dividends in
Other Stock and Property Reclassifications. In case at any time or from
time to time the holders of the Common Stock (or any shares of stock or other
securities at the time receivable upon the exercise of this Warrant) shall have
received, or, on or after the record date fixed for the determination of
eligible shareholders, shall have become entitled to receive, without payment
therefor,
(1) other
or additional stock or other securities or property (other than cash) by way of
dividend (other than dividends or other distributions payable in additional
shares of Common Stock which are subject to adjustment pursuant to Section
4.C),
(2) any
cash or other property paid or payable out of any source other than retained
earnings (determined in accordance with generally accepted accounting
principles), or
(3) other
or additional stock or other securities or property (including cash) by way of
stock-split, spin-off, reclassification, combination of shares or similar
corporate rearrangement
(other
than in the cases of (1), (2) and (3) above, (x) additional shares of Common
Stock or any other stock or securities into which such Common Stock shall have
been changed, (y) any other stock or securities convertible into or exchangeable
for such Common Stock or such other stock or securities or (z) any stock
purchase rights, issued as a stock dividend or stock-split, adjustments in
respect of which shall be covered by the terms of Section 4.B, Section
4.C or Section
4.D, then and in each such case, Holder, upon the exercise hereof as
provided in Section 1,
shall be entitled to receive the amount of stock and other securities and
property (including cash in the cases referred to in clauses (2) and (3) above)
which such Holder would hold on the date of such exercise if on the Original
Issuance Date Holder had been the holder of record of the number of shares of
Common Stock called for on the face of this Warrant, as adjusted in accordance
with the first paragraph of this Warrant, and had thereafter, during the period
from the Original Issuance Date to and including the date of such exercise,
retained such shares and/or all other or additional stock and other securities
and property (including cash in the cases referred to in clause (2) and (3)
above) receivable by it as aforesaid during such period, giving effect to all
adjustments called for during such period by Section 4.A
and Section 4.B.
B. Adjustment for
Reorganization, Consolidation and Merger. In case of any reorganization
of the Company (or any other corporation the stock or other securities of which
are at the time receivable on the exercise of this Warrant) after the Original
Issuance Date, or in case, after such date, the Company (or any such other
corporation) shall consolidate with or merge into another corporation or entity
or convey all or substantially all its assets to another corporation or entity,
then and in each such case Holder, upon the exercise hereof as provided in Section 1
at any time after the consummation of such reorganization, consolidation, merger
or conveyance, shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise of this Warrant prior to
such consummation, the stock or other securities or property to which such
Holder would have been entitled upon such consummation if Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in Sections 4.A, Section
4.B, Section
4.C and Section
4.D in each
such case, the terms of this Warrant shall be applicable to the shares of stock
or other securities or property receivable upon the exercise of this Warrant
after such consummation.
C. Adjustment for Certain
Dividends and Distributions. If the Company at any time or from time to
time makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event:
(1) the
Purchase Price then in effect shall be decreased as of the time of such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Purchase Price then in effect by a fraction
(A) the numerator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date, and (B) the denominator of which
shall be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date as the case may be, plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Purchase Price shall be
recomputed accordingly as of the close of business on such record date, and
thereafter the Purchase Price shall be adjusted pursuant to this Section 4.C
as of the time of actual payment of such dividends or distributions;
and
(2) the
number of shares of Common Stock theretofore receivable upon the exercise of
this Warrant shall be increased, as of the time of such issuance or, in the
event such record date is fixed, as of the close of business on such record
date, in inverse proportion to the decrease in the Purchase Price.
D. Stock Split and Reverse
Stock Split. If the Company at any time or from time to time effects a
stock split or subdivision of the outstanding Common Stock, the Purchase Price
then in effect immediately before that stock split or subdivision shall be
proportionately decreased and the number of shares of Common Stock theretofore
receivable upon the exercise of this Warrant shall be proportionately increased.
If the Company at any time or from time to time effects a reverse stock split or
combines the outstanding shares of Common Stock into a smaller number of shares,
the Purchase Price then in effect immediately before that reverse stock split or
combination shall be proportionately increased and the number of shares of
Common Stock theretofore receivable upon the exercise of this Warrant shall be
proportionately decreased. Each adjustment under this Section 4.D
shall become effective at the close of business on the date the stock split,
subdivision, reverse stock split or combination becomes effective.
E.
Sale of
Shares Below Conversion Price:
(a) In
the event the Company shall at any time issue Additional Stock (as defined
hereafter) at a price per share less than the Exercise Price then in effect or
without consideration (a “Trigger
Issuance”) then the Exercise Price then in effect upon each such issuance
shall be adjusted to a price determined as follows:
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Exercise
Price = (A x B) +
D
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A + C
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Where:
“A” equals the number of shares of
Common Stock outstanding, including Additional Stock deemed to be issued
hereunder, immediately preceding such Trigger Issuance;
“B” equals the Exercise Price in effect
immediately preceding such Trigger Issuance;
“C” equals the number of Additional
Stock issued or deemed issued hereunder as a result of the Trigger Issuance;
and
“D” equals the aggregate consideration,
if any, received or deemed to be received by the Company upon such Trigger
Issuance
provided,
however,
that in no event shall the Exercise Price after giving effect to such Trigger
Issuance be greater than the Exercise Price immediately prior to such Trigger
Issuance.
(b) “Additional
Stock” shall mean Common Stock or options, warrants or other rights to
acquire or securities convertible into or exchangeable for shares of Common
Stock, including shares held in the Company’s treasury, and shares of Common
Stock issued upon the exercise of any options, rights or warrants to subscribe
for shares of Common Stock and shares of Common Stock issued upon the direct or
indirect conversion or exchange of securities for shares of Common Stock, other than Additional
Stock:
(i) issued
or issuable upon exercise of this Warrant;
(ii) issued
or issuable upon the conversion of any Notes issued to the Holder pursuant to
the Loan Agreement;
(iii)
issued or issuable upon the conversion or exercise or exchange of options,
warrants, rights and other securities or debt that are outstanding on the
Closing Date;
(iv)
issued or issuable pursuant to stock option plans which have been
approved by the Company’s directors and shareholders on or prior to the Closing
Date; or
(v)
issued or issuable as a result of any anti-dilution in any
outstanding securities of the Company that are outstanding on the Closing
Date.
F. Certificate as to
Adjustments. Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Section 4,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of a
Warrant a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any holder of a Warrant,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) Purchase Price at the
time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
exercise of the Warrant.
5.
Treatment of Warrant Upon
Acquisition of Company.
A. “Acquisition”. For
the purpose of this Warrant, “Acquisition”
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company’s securities before the transaction
beneficially own less than 51% of the outstanding voting securities of the
surviving entity after the transaction.
B. Treatment of Warrant at
Acquisition.
(i) Upon
the written request of the Company, Holder agrees that, in the event of an
Acquisition that is not an asset sale and in which the sole consideration is
cash, either (a) Holder shall exercise its conversion or purchase right under
this Warrant and such exercise will be deemed effective immediately prior to the
consummation of such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will expire upon the consummation of such
Acquisition. If Holder has not otherwise exercised this Warrant in
full, the Company shall provide Holder with written notice of its request
relating to the foregoing (together with such reasonable information as Holder
may request in connection with such contemplated Acquisition giving rise to such
notice), which is to be delivered to Holder not less than twenty (20) days prior
to the closing of the proposed Acquisition.
(ii)
Upon the written request of the Company, Holder agrees that, in the
event of an Acquisition that is an “arms length” sale of all or substantially
all of the Company’s assets (and only its assets) to a third party that is not
an Affiliate (as defined below) of the Company (a “True Asset
Sale”), either (a) Holder shall exercise its purchase right under this
Warrant and such exercise will be deemed effective immediately prior to the
consummation of such Acquisition or (b) if Holder elects not to exercise the
Warrant, this Warrant will continue until the Expiration Date if the Company
continues as a going concern following the closing of any such True Asset
Sale. The Company shall provide Holder with written notice of its
request relating to the foregoing (together with such reasonable information as
Holder may request in connection with such contemplated Acquisition giving rise
to such notice), which is to be delivered to Holder not less than twenty (20)
days prior to the closing of the proposed Acquisition.
(iii)
Upon the closing of any Acquisition other than those particularly
described in subsections (i) and (ii) above, the successor entity shall assume
the obligations of this Warrant, and this Warrant shall be exercisable for the
same securities, cash, and property as would be payable for the shares issuable
upon exercise of the unexercised portion of this Warrant as if such shares were
outstanding on the record date for the Acquisition and subsequent
closing. The Purchase Price and/or number of shares of Common Stock
issuable upon exercise of this Warrant shall be appropriately adjusted
accordingly.
C. “Affiliate”. As
used herein “Affiliate”
shall mean any person or entity that owns or controls directly or indirectly ten
(10) percent or more of the stock of Company, any person or entity that controls
or is controlled by or is under common control with such persons or entities,
and each of such person’s or entity’s officers, directors, joint venturers or
partners, as applicable.
6.
Notices of
Record Date. In case:
A. the
Company shall take a record of the holders of its Common Stock (or other stock
or securities at the time receivable upon the exercise of the Warrants) for the
purpose of entitling them to receive any dividend or other distribution, or any
right to subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or
B. of
any capital reorganization of the Company, any reclassification of the capital
stock of the Company, any consolidation or merger of the Company with or into
another corporation, or any conveyance of all or substantially all of the assets
of the Company to another corporation, or
C. of
any voluntary dissolution, liquidation or winding-up of the Company, then, and
in each such case, the Company will mail or cause to be mailed to each holder of
a Warrant at the time outstanding a notice specifying, as the case may be,
(a) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (b) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is expected to take place, and the time,
if any is to be fixed, as of which the holders of record of Common Stock (or
such stock or securities at the time receivable upon the exercise of the
Warrants) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up, such notice shall be mailed at least ten
(10) days prior to the date therein specified.
7.
Loss or
Mutilation. Upon receipt by the Company of evidence satisfactory to it
(in the exercise of reasonable discretion) of the ownership of and the loss,
theft, destruction or mutilation of any Warrant and (in the case of loss, theft
or destruction) of indemnity satisfactory to it (in the exercise of reasonable
discretion), and (in the case of mutilation) upon surrender and cancellation
thereof, the Company will execute and deliver in lieu thereof a new Warrant of
like tenor.
8.
Reservation of Common
Stock. The Company shall at all times reserve and keep available for
issue upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full of
all outstanding Warrants. All of the shares of Common Stock issuable upon the
exercise of the rights represented by this Warrant will, upon issuance and
receipt of the Purchase Price therefor, be fully paid and
nonassessable, and free from all preemptive rights, rights of first refusal or
first offer, taxes, liens and charges of whatever nature, with respect to the
issuance thereof.
9.
Registration
Rights. All shares of Common Stock issuable upon exercise of
this Warrant shall have the registration rights set forth in the Loan
Agreement.
10. Notices. All notices
and other communications from the Company to the Holder of this Warrant shall be
mailed by first class, registered or certified mail, postage prepaid, to the
Holder’s address listed in Section 8.3 of the Loan Agreement or such other
address furnished to the Company in writing by the Holder.
11. Change; Modifications;
Waiver. No terms of this Warrant may be amended, waived or modified
except by the express written consent of the Company and the
Holder.
12. Headings. The
headings in this Warrant are for purposes of convenience in reference only, and
shall not be deemed to constitute a part hereof.
13. Governing Law, Etc.
This Warrant shall be governed by and construed in accordance with the internal
laws of the State of New York without regard to the conflicts of laws principles
thereof. The parties hereto hereby irrevocably agree that any suit or proceeding
arising directly and/or indirectly pursuant to or under this Agreement, shall be
brought solely in a federal or state court located in the City, County and State
of New York. By its execution hereof, the parties hereby covenant and
irrevocably submit to the in personam jurisdiction
of the federal and state courts located in the City, County and State of New
York and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in New York City. The parties hereto expressly and
irrevocably waive any claim that any such jurisdiction is not a convenient forum
for any such suit or proceeding and any defense or lack of in personam jurisdiction with
respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
its reasonable counsel fees and disbursements.
14. Counterparts. This
Warrant may be executed in counterparts.
15. Successors. All
the covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributes, successors, assigns, and transferees.
16. Automatic Conversion upon
Expiration. In the event that, upon the Expiration Date, the
Fair Market Value of one share of Common Stock (or other security issuable upon
the exercise hereof) as determined in accordance with Section
1.B above is greater than the Purchase Price in effect on such date, then
this Warrant shall automatically be deemed on and as of such date to be
converted pursuant to Section
1.B above as to all shares (or such other securities) for which it shall
not previously have been exercised or converted, and the Company shall promptly
deliver a certificate representing the shares (or such other securities) issued
upon such conversion to Holder.
[Signature
page follows]
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly
authorized officer.
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XXXXXXXXXXXXXXX.XXX,
INC.
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By:
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/s/ Xxxxx Xxxxxxxxx
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Name:
Xxxxx Xxxxxxxxx
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Title:
President &
CEO
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ACCEPTED
AND AGREED TO BY HOLDER:
HWH
LENDING, LLC
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By:
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/s/ Xxxx Xxxxxx
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Name:
Xxxx Xxxxxx
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Title: President
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