EXHIBIT 4.3
PROSPECT MEDICAL HOLDINGS, INC.
AND
SECURITY CAPITAL TRADING, INC.
REPRESENTATIVE'S
WARRANT AGREEMENT
Dated as of _______________, 1998
REPRESENTATIVE'S WARRANT AGREEMENT dated as of _______________, 1998
between PROSPECT MEDICAL HOLDINGS, INC., a Delaware corporation (the
"Company"), and SECURITY CAPITAL TRADING, INC. (hereinafter referred to
variously as the "Holder" or "Holders" or the "Representative").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to the Representative warrants
("Warrants") to purchase up to an aggregate of 300,000 shares of Common
Stock, $0.01 par value, of the Company and/or 300,000 redeemable Common Stock
purchase warrants of the Company ("Redeemable Warrants"), each Redeemable
Warrant to purchase one additional share of Common Stock; and
WHEREAS, the Representative has agreed pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between
the Company and the several Underwriters listed therein to act as the
Representative in connection with the Company's proposed public offering of
up to 3,000,000 shares of Common Stock and 3,000,000 Redeemable Warrants (the
"Public Warrants") at a public offering price of $_____ per share of Common
Stock and $______ per Redeemable Warrant (the "Public Offering"); and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Representative in consideration for, and as
part of the Representative's compensation in connection with, the
Representative acting as the Representative pursuant to the Underwriting
Agreement;
NOW, THEREFORE, in consideration of the premises, the payment by the
Representative to the Company of an aggregate of thirty dollars ($30.00),
the agreements herein set forth and other good and valuable consideration,
hereby acknowledged, the parties hereto agree as follows:
1. GRANT. The Representative (or its designees) is hereby granted the
right to purchase, at any time from _______________, 1999 [one year after date
of this Agreement], until 5:30 P.M., New York time, on ___________, 2003 [five
years after date of this Agreement], up to an aggregate of 300,000 shares of
Common Stock and/or 300,000 Redeemable Warrants at an initial exercise price
(subject to adjustment as provided in Section 8 hereof) of $_____ per share of
Common Stock [120% of initial public offering price per share of Common Stock],
and $_____ per Redeemable Warrant [120% of initial public offering price per
Redeemable Warrant], subject to the terms and conditions of this Agreement. One
Redeemable Warrant is exercisable to purchase one additional share of Common
Stock at an initial exercise price of $_____ [140% of initial public offering
price per share of the Common Stock] from ______________, 1999 [one year after
date of this Agreement] until 5:30 p.m. New York time on ____________, 2003[5
years after date of this Agreement], at which time the Redeemable Warrants
shall expire. Except as set forth herein, the shares of Common Stock and the
Redeemable Warrants issuable upon exercise of the Warrants are in all respects
identical to the shares of Common Stock and the Public Warrants being purchased
by the Underwriters for resale to the public pursuant to the terms and
provisions of the Underwriting Agreement. The shares of Common Stock and the
Redeemable Warrants issuable upon exercise of the Warrants are sometimes
hereinafter referred to collectively as the "Securities."
2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall
be in the form set forth in Exhibit A, attached hereto and made a part
hereof, with such appropriate insertions, omissions, substitutions, and other
variations as required or permitted by this Agreement.
3. EXERCISE OF WARRANT.
3.1 METHOD OF EXERCISE. The Warrants initially are exercisable at
an initial exercise price per share of Common Stock and per Redeemable
Warrant set forth in Section 6 hereof payable by certified or official bank
check in New York Clearing House funds, subject to adjustment as provided in
Section 8 hereof. Upon surrender of a Warrant Certificate with the annexed
Form of Election to Purchase Pursuant to Section 3.1 duly executed, together
with payment of the Exercise Price (as hereinafter defined) for the shares of
Common Stock and/or the Redeemable Warrants to be purchased at the Company's
principal executive offices in California (presently located at 000 Xxxxx
Xxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 90071) the registered
holder of a Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased and a certificate or certificates for the Redeemable Warrants so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not
as to fractional shares of the Common Stock and Redeemable Warrants
underlying the Warrants). In the event the Company redeems all of the Public
Warrants, then the Warrants may only be exercised if such exercise is
accompanied by the simultaneous exercise of the Redeemable Warrant(s)
underlying the Warrants being so exercised. Warrants may be exercised to
purchase all or part of the shares of Common Stock together with an equal or
unequal number of the Redeemable Warrants represented thereby. In the case of
the purchase of less than all the shares of Common Stock and/or the
Redeemable Warrants purchasable under any Warrant Certificate, the Company
shall cancel said Warrant Certificate upon the surrender thereof and shall
execute and deliver a new Warrant Certificate of like tenor for the balance
of the shares of Common Stock and Redeemable Warrants purchasable thereunder.
3.2 EXERCISE BY SURRENDER OF WARRANT. In addition to the method of
payment set forth in Section 3.1 and in lieu of any cash payment required
thereunder, the Holder(s) of the Warrants shall have the right at any time
and from time to time to exercise the Warrants in full or in part by
surrendering the Warrant Certificate in the manner specified in Section 3.1
hereof. The number of shares of Common Stock to be issued pursuant to this
Section 3.2 shall be equal to the difference between (a) the number of shares
of Common Stock in respect of which the Warrants are exercised and (b) a
fraction, the numerator of which shall be the number of shares of Common
Stock in respect of which the Warrants are exercised multiplied by the
Exercise Price and the denominator of which shall be the Market Price (as
defined in Section 3.3 hereof) of the shares of Common Stock. The number of
Redeemable Warrants to be issued pursuant to this Section 3.2 shall be equal
to the difference between (a) the number of Redeemable Warrants in respect of
which the Warrants are exercised and (b) a fraction, the numerator of which
shall be the number of Redeemable Warrants in respect of which the Warrants
are exercised multiplied by the Exercise Price and the denominator of which
shall be the Market Price (as defined in Section 3.3 hereof) of the
Redeemable Warrants. Solely for the purposes of this paragraph, Market Price
shall be calculated either (i) on the date on which the Form of Election To
Purchase Pursuant to Section 3.2 annexed to the Warrant Certificate is deemed
to have been sent to the Company pursuant to Section 14 hereof ("Notice
Date") or (ii)
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as the average of the Market Prices for each of the five trading days
preceding the Notice Date, whichever of (i) or (ii) is greater.
3.3 DEFINITION OF MARKET PRICE. As used herein, the phrase
"Market Price" at any date shall be deemed to be (i) when referring to the
Common Stock, the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted
to trading or by the Nasdaq SmallCap Market or the Nasdaq National Market (in
either case, "Nasdaq") or, if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted by Nasdaq, the average
closing bid price as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through Nasdaq or a similar organization if Nasdaq is
no longer reporting such information, or if none of the foregoing conditions
applies, as determined in good faith (using customary valuation methods) by
resolution of the members of the Board of Directors of the Company, based on
the best information available to it, or (ii) when referring to a Redeemable
Warrant, the last reported sales price, or, in the case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three trading days, in either case as officially reported by the
principal securities exchange on which the Redeemable Warrants are listed or
admitted to trading or by Nasdaq, or, if the Redeemable Warrants are not
listed or admitted to trading on any national securities exchange or quoted
by Nasdaq, the average closing bid price as furnished by the NASD through
Nasdaq or a similar organization if Nasdaq is no longer reporting such
information, or if none of the foregoing conditions applies, the Market Price
of a Redeemable Warrant shall equal the difference between the Market Price
of the Common Stock and the Exercise Price of the Redeemable Warrant.
4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock and Redeemable Warrants
and/or other securities, properties or rights underlying such Warrants and,
upon the exercise of the Redeemable Warrants, the issuance of certificates
for shares of Common Stock and/or other securities, properties or rights
underlying such Redeemable Warrants, shall be made forthwith (and in any
event within five business days thereafter) without charge to the Holder
thereof including, without limitation, any tax which may be payable in
respect of the issuance thereof, and such certificates shall (subject to the
provisions of Sections 5 and 7 hereof) be issued in the name of, or in such
names as may be directed by, the Holder thereof; provided, however, 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 such
certificates in a name other than that of the Holder, and the Company shall
not be required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the
shares of Common Stock and the Redeemable Warrants underlying the Warrants
and the shares of Common Stock underlying the Redeemable Warrants (and/or
other securities, property or rights issuable upon the exercise of the
Warrants or the Redeemable Warrants) shall be executed on behalf of the
Company by the manual or facsimile signature of the then Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
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Certificates representing the shares of Common Stock and Redeemable Warrants,
and the shares of Common Stock underlying each Redeemable Warrant (and/or
other securities, property or rights issuable upon exercise of the Warrants)
shall be dated as of the Notice Date (regardless of when executed or
delivered) and dividend-bearing securities so issued shall accrue dividends
from the Notice Date.
5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the
Warrants are being acquired as an investment and not with a view to the
distribution thereof; that the Warrants may not be sold, transferred,
assigned, hypothecated or otherwise disposed of, in whole or in part, for a
period of one year from the date hereof, except to officers of the
Representative.
6. EXERCISE PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant
shall be $______ per share of Common Stock [120% of the initial public
offering price of the Common Stock] and $_____ per Redeemable Warrant
[120% of the initial public offering price of the Redeemable Warrants]. The
adjusted exercise price shall be the price which shall result from time to
time from any and all adjustments of the initial exercise price in accordance
with the provisions of Section 8 hereof. Any transfer of a Warrant shall
constitute an automatic transfer and assignment of the registration rights
set forth in Section 7 hereof with respect to the Securities or other
securities, properties or rights underlying the Warrants.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context or unless otherwise specified.
7. REGISTRATION RIGHTS.
7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrants,
the shares of Common Stock and Redeemable Warrants, or other securities
issuable upon exercise of the Warrants, and the shares of Common Stock or
other securities issuable upon exercise of the Redeemable Warrants
(collectively, the "Warrant Securities") have been registered under the
Securities Act of 1933, as amended (the "Act") pursuant to the Company's
Registration Statement on Form S-1 (Registration No. 333- ) (the
"Registration Statement"). All of the representations and warranties of the
Company contained in the Underwriting Agreement relating to the Registration
Statement, the Preliminary Prospectus and Prospectus (as such terms are
defined in the Underwriting Agreement) and made as of the dates provided
therein, are incorporated by reference herein. The Company agrees and
covenants promptly to file post-effective amendments to such Registration
Statement as may be necessary in order to maintain its effectiveness and
otherwise to take such action as may be necessary to maintain the
effectiveness of the Registration Statement as long as any Warrants are
outstanding. In the event that, for any reason, whatsoever, the Company shall
fail to maintain the effectiveness of the Registration Statement, the
certificates representing the Warrant Securities shall bear the following
legend:
The securities represented by this certificate have not been registered
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under the Securities Act of 1933, as amended ("Act"), and may not be
offered or sold except pursuant to (i) an effective registration
statement under the Act, (ii) to the extent applicable, Rule 144 under
the Act (or any similar rule under such Act relating to the disposition
of securities), or (iii) an opinion of counsel, if such opinion
shall be reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
7.2 PIGGYBACK REGISTRATION. If, at any time commencing after the
date hereof and expiring seven years thereafter, the Company proposes to
register any of its securities under the Act (other than pursuant to Form
X-0, Xxxx X-0 or a comparable registration statement), the Company will give
written notice by registered mail, at least 30 days prior to the filing of
each such registration statement, to the Representative and to all other
Holders of the Warrants and/or Warrant Securities of its intention to do so.
If the Representative or other Holders of the Warrants and/or Warrant
Securities notify the Company within 20 business days after receipt of any
such notice of its or their desire to include any such Warrant Securities in
such proposed registration statement, the Company shall afford the
Representative and such Holders of the Warrants and/or Warrant Securities the
opportunity to have any such Warrant Securities registered under such
registration statement, unless and to the extent that the managing
underwriter, if any, of the offering covered by such registration statement
determines that the inclusion of such securities therein would impair the
success of said offering.
Notwithstanding the provisions of this Section 7.2, the Company
shall (i) have the right at any time after it shall have given written notice
pursuant to this Section 7.2 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file
any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof, and (ii) have no obligation
pursuant to this Section 7.2 to the extent that, at the time the registration
statement is proposed to be filed, the holders of such securities may freely
sell such securities pursuant to the Rules and Regulations.
7.3 DEMAND REGISTRATION.
(a) At any time commencing after the date hereof and expiring
five years thereafter, the Holders of the Warrants and/or Warrant Securities
representing a "Majority" (as hereinafter defined) of such securities
(assuming the exercise of all of the Warrants) shall have the right (which
right is in addition to the registration rights under Section 7.2 hereof),
exercisable by written notice to the Company, to have the Company prepare and
file with the Securities and Exchange Commission (the "Commission"), on one
occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the
Company and counsel for the Representative and Holders, in order to comply
with the provisions of the Act, so as to permit a public offering and sale of
their respective Warrant Securities for six consecutive months by such
Holders and any other Holders of the Warrants and/or Warrant Securities who
notify the Company within ten days after receiving notice from the Company of
such request.
(b) The Company covenants and agrees to give written notice of
any
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registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within
ten days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein,
if the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant
to the written notice specified in Section 7.3(a) of a Majority of the
Holders of the Warrants and/or Warrant Securities, the Company may, at its
option, upon the written notice of election of a Majority of the Holders of
the Warrants and/or Warrant Securities requesting such registration,
repurchase (i) any and all Warrant Securities of such Holders at the higher
of the Market Price per share of Common Stock and per Redeemable Warrant,
determined as of (x) the date of the notice sent pursuant to Section 7.3(a)
or (y) the expiration of the period specified in Section 7.4(a) and (ii) any
and all Warrants of such Holders at such Market Price less the Exercise Price
of such Warrant. Such repurchase shall be in immediately available funds and
shall close within two (2) days after the later of (i) the expiration of the
period specified in Section 7.4(a) or (ii) the delivery of the written notice
of election specified in this Section 7.3(c).
7.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a
registration statement within 90 days of receipt of a demand therefor
pursuant to Section 7.3 hereof, shall use its reasonable best efforts to have
any registration statements declared effective at the earliest practicable
time, and shall furnish each Holder desiring to sell Warrant Securities such
number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding fees and
expenses of Holder(s)' counsel and any underwriting or selling commissions),
fees and expenses in connection with all registration statements filed
pursuant to Sections 7.2 and 7.3(a) hereof including, without limitation, the
Company's legal and accounting fees, printing expenses and blue sky fees and
expenses.
(c) The Company will take all necessary action which may be
required in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of such states as reasonably are requested by the Holder(s), provided
that the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation to do
business under the laws of any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement hereunder and
each person, if any, who controls such Holders within the meaning of Section
15 of the Act or Section 20(a) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from
such registration statement but only to the same extent and with the same
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effect as the provisions pursuant to which the Company has agreed to
indemnify each of the Underwriters contained in Section 7 of the Underwriting
Agreement.
(e) The Holder(s) of the Warrant Securities to be sold
pursuant to a registration statement hereunder, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its
officers and directors and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which they may become subject under the Act, the
Exchange Act or otherwise, arising from information furnished by or on behalf
of such Holders, or their successors or assigns, for specific inclusion in
such registration statement to the same extent and with the same effect as
the provisions contained in Section 7 of the Underwriting Agreement pursuant
to which the Underwriters have agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any
securities other than the Warrant Securities to be included in any
registration statement filed pursuant to Section 7.3 hereof, or permit any
other registration statement to be filed during the effectiveness of a
registration statement filed pursuant to Section 7.3 hereof (other than
registrations on Form S-4 or S-8), without the prior written consent of the
Holders of the Warrants and Warrant Securities representing a Majority of
such securities covered by such registration statement.
(h) The Company shall furnish to each Holder participating in
an offering covered by a registration statement hereunder and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration relates to an
underwritten public offering, an opinion dated the date of the closing under
the underwriting agreement) relating to the due incorporation of the Company,
the validity of the shares being sold and the due execution and delivery by
the Company of the underwriting agreement, if any, and (ii) a "cold comfort"
letter dated the effective date of such registration statement (and, if such
registration relates to an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement
(and the prospectus included therein) and, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
accountants' "cold comfort" letters delivered to underwriters in underwritten
public offerings of securities.
(i) The Company shall as soon as practicable, and in any event
within 15 months after the effective date of the registration statement, make
"generally available to its security holders" (within the meaning of Rule 158
under the Act) an earnings statement (which need not be audited) complying
with Section 11(a) of the Act and covering a period of at least 12
consecutive months beginning after the effective date of the registration
statement.
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(j) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriters, copies of all
correspondence between the Commission and the Company, its counsel or
auditors and all Company-prepared memoranda relating to discussions with the
Commission or its staff with respect to the registration statement and permit
each Holder and underwriter to do such investigation, upon reasonable advance
notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all
to such reasonable extent and at such reasonable times and as often as any
such Holder or underwriter shall reasonably request.
(k) The Company shall enter into an underwriting agreement
with the managing underwriters selected for such underwriting by Holders
holding a Majority of the Warrant Securities requested pursuant to Section
7.3(a) to be included in such underwriting, which may be the Representative.
Such agreement shall be satisfactory in form and substance to the Company,
each Holder and such managing underwriter(s), and shall contain such
representations, warranties and covenants by the Company and such other terms
as are customarily contained in agreements of that type used by the managing
underwriter(s). The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Securities whether pursuant
to Section 7.2 or Section 7.3(a) and may, at their option, require that any
or all of the representations, warranties and covenants of the Company to or
for the benefit of such underwriter(s) shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriter(s) except as they may relate to such Holders and their intended
methods of distribution, or as otherwise provided for herein.
(l) For purposes of this Agreement, the term "Majority" in
reference to the Holders of Warrants or Warrant Securities, shall mean in
excess of 50% of the then outstanding Warrants or Warrant Securities that (i)
are not held by the Company, an affiliate, officer, creditor, employee or
agent thereof or any of their respective affiliates, members of their family,
persons acting as nominees therefor or in conjunction therewith and (ii) have
not been resold to the public pursuant to a registration statement filed with
the Commission under the Act.
8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES.
8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the Company shall
pay a dividend in, or make a distribution of, shares of Common Stock or of
the Company's capital stock convertible into Common Stock, the Exercise Price
shall forthwith be proportionately decreased. An adjustment made pursuant to
this Section 8.2 shall be made as of the record date for the subject stock
dividend or distribution.
8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of
the Exercise
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Price pursuant to the provisions of this Section 8, the number of Warrant
Securities issuable upon the exercise at the adjusted exercise price of each
Warrant shall be adjusted to the nearest full amount by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Securities issuable upon exercise of the Warrants
immediately prior to such adjustment and dividing the product so obtained by
the adjusted Exercise Price.
8.4 DEFINITION OF COMMON STOCK. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as
Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting
from successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value.
8.5 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock),
the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the
holder of each Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger, by a
holder of the number of securities of the Company for which such Warrant
might have been exercised immediately prior to such consolidation or merger.
Such supplemental warrant agreement shall provide for adjustments which shall
be identical to the adjustments provided in Section 8. The above provision of
this subsection shall similarly apply to successive consolidations or
mergers.
8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No
adjustment of the Exercise Price shall be made if the amount of said
adjustment shall be less than two cents ($.02) per Warrant, provided,
however, that in such case any adjustment that would otherwise be required
then to be made shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall amount to at least two cents ($.02) per
Warrant.
9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant Certificate or Warrant Certificates of like tenor and date
representing in the aggregate the right to purchase the same number of
Warrant Securities in such denominations as shall be designated by the Holder
thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation
of the Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue
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certificates representing fractions of shares of Common Stock or Redeemable
Warrants upon the exercise of the Warrants, nor shall it be required to issue
scrip or pay cash in lieu of fractional interests, it being the intent of the
parties that all fractional interests shall be eliminated by rounding any
fraction up or down to the nearest whole number of shares of Common Stock or
Redeemable Warrants or other securities, properties or rights.
11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all
times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants
and the Redeemable Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the
Warrants and payment of the Exercise Price therefor, all shares of Common
Stock, Redeemable Warrants and other securities issuable upon such exercise
shall be duly and validly issued, fully paid, non-assessable and not subject
to the preemptive rights of any stockholder. The Company further covenants
and agrees that upon exercise of the Redeemable Warrants underlying the
Warrants and payment of the respective Redeemable Warrant exercise price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the Warrants
shall be outstanding, the Company shall use its reasonable best efforts to
cause all shares of Common Stock issuable upon the exercise of the Warrants
and Redeemable Warrants and all Redeemable Warrants underlying the Warrants
to be listed (subject to official notice of issuance) on all securities
exchanges on which the Common Stock or the Public Warrants issued to the
public in connection herewith may then be listed and/or quoted on Nasdaq.
12. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any
time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings or
capital surplus (in accordance with applicable law), as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company,
or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall
be proposed;
then, in any one or more of said events, the Company shall give written
notice of such event at least 30 days prior to the date fixed as a record
date or the date of closing the transfer books for the
10
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled to
vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer
books, as the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with the
declaration or payment of any such dividend, or the issuance of any
convertible or exchangeable securities, or subscription rights, options or
warrants, or any proposed dissolution, liquidation, winding up or sale.
13. REDEEMABLE WARRANTS. The form of the certificate representing
Redeemable Warrants (and the form of election to purchase shares of Common
Stock upon the exercise of Redeemable Warrants and the form of assignment
printed on the reverse thereof) shall be substantially as set forth in
Exhibit "A" to the Warrant Agreement dated as of the date hereof by and
between the Company and American Stock Transfer and Trust Company (the
"Redeemable Warrant Agreement"). Each Redeemable Warrant issuable upon
exercise of the Warrants shall evidence the right to initially purchase a
fully paid and non-assessable share of Common Stock at an initial purchase
price of $_____ per share [140% of the initial public offering price per share
of Common Stock] from ________________, 1999 [one year after date of
Prospectus] until 5:30 p.m. New York time on ________________, 2003 [five years
after date of Prospectus] at which time the Redeemable Warrants, unless the
exercise period has been extended, shall expire. The exercise price of the
Redeemable Warrants and the number of shares of Common Stock issuable upon the
exercise of the Redeemable Warrants are subject to adjustment, whether or not
the Warrants have been exercised and the Redeemable Warrants have been issued,
in the manner and upon the occurrence of the events set forth in Section 8 of
the Redeemable Warrant Agreement, which is hereby incorporated herein by
reference and made a part hereof as if set forth in its entirety herein. Subject
to the provisions of this Agreement and upon issuance of the Redeemable Warrants
underlying the Warrants, each registered holder of such Redeemable Warrant
shall have the right to purchase from the Company (and the Company shall issue
to such registered holders) up to the number of fully paid and non-assessable
shares of Common Stock (subject to adjustment as provided herein and in the
Redeemable Warrant Agreement), free and clear of all preemptive rights of
stockholders, provided that such registered holder complies with the terms
governing exercise of the Redeemable Warrant set forth in the Redeemable
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Redeemable Warrant Agreement. Upon exercise
of the Redeemable Warrants, the Company shall forthwith issue to the
registered holder of any such Redeemable Warrant in his name or in such name
as may be directed by him, certificates for the number of shares of Common
Stock so purchased. Except as otherwise provided in this Agreement, the
Redeemable Warrants underlying the Warrants shall be governed in all respects
by the terms of the Redeemable Warrant Agreement. The Redeemable Warrants
shall be transferable in the manner provided in the Redeemable Warrant
Agreement, and upon any such transfer, a new Redeemable Warrant Certificate
shall be issued promptly to the transferee. The Company covenants to, and
agrees with, the Holder(s) that without the prior written consent of the
Holder(s), which will not be unreasonably withheld, the Redeemable Warrant
Agreement will not be modified, amended, canceled, altered or superseded, and
that the Company will send to each Holder, irrespective of whether or not the
Warrants have been exercised, any and all notices required by the Redeemable
Warrant Agreement to be sent to holders of Redeemable Warrants.
14. NOTICES.
11
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made and sent when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3.1
hereof or to such other address as the Company may designate by notice to the
Holders.
15. SUPPLEMENTS AND AMENDMENTS. The Company and the Representative may
from time to time supplement or amend this Agreement without the approval of
any Holders of Warrant Certificates (other than the Representative) in order
to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or
to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Representative may deem necessary or
desirable and which the Company and the Representative deem shall not
adversely affect the interests of the Holders of Warrant Certificates.
16. SUCCESSORS. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holders
and their respective successors and assigns hereunder.
17. TERMINATION. This Agreement shall terminate at the close of
business on ______________, 2005. Notwithstanding the foregoing, the
indemnification provisions of Section 7 shall, as to any cause of action
accruing thereunder, survive such termination until the close of business on
the third anniversary of the date on which said cause of action accrues.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each
Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be
construed in accordance with the laws of said State without giving effect to
the rules of said State governing the conflicts of laws.
The Company, the Representative and the Holders hereby agree that
any action, proceeding or claim against it arising out of, or relating in any
way to, this Agreement shall be brought and enforced in the courts of the
State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company, the Representative and the
Holders hereby irrevocably waive any objection to such exclusive jurisdiction
or inconvenient forum. Any such process or summons to be served upon any of
the Company, the Representative and the Holders (at the option of the party
bringing such action, proceeding or claim) may be served by transmitting a
copy thereof, by registered or certified mail, return receipt requested,
postage prepaid, addressed to it at the address set forth in Section 14
hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim. The
Company, the Representative and the Holders agree that the prevailing
party(ies) in any such action or proceeding shall be entitled to recover from
the other party(ies) all of its/their reasonable legal costs and expenses
relating to such action or proceeding and/or incurred in connection with the
preparation
12
therefor.
19. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the
Underwriting Agreement and the Redeemable Warrant Agreement to the extent
portions thereof are referred to herein) contains the entire understanding
between the parties hereto with respect to the subject matter hereof and may
not be modified or amended except by a writing duly signed by the party
against whom enforcement of the modification or amendment is sought.
20. SEVERABILITY. If any provision of this Agreement shall be held to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they
be construed as, a part of this Agreement and shall be given no substantive
effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Representative and any other registered Holder(s) of the Warrant Certificates
or Warrant Securities any legal or equitable right, remedy or claim under
this Agreement; and this Agreement shall be for the sole benefit of the
Company and the Representative and any other registered Holders of Warrant
Certificates or Warrant Securities.
13
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, as of the day and year first above written.
PROSPECT MEDICAL HOLDINGS, INC.
By:
----------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
Attest:
--------------------------------
Secretary
SECURITY CAPITAL TRADING, INC.
By:
----------------------------------------
14
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES
ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
(i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
(ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE
UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, ___________, 2003
No. W- Warrants to Purchase
_________ shares of Common
Stock and/or ________ Redeemable
Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ____________________________, or
registered assigns, is the registered holder of ______________ Warrants to
purchase initially, at any time from _______________, 1999 until 5:30 p.m. New
York time on _______________, 2003 ("Expiration Date"), up to _______________
fully paid and non-assessable shares of common stock, $0.01 par value ("Common
Stock"), of PROSPECT MEDICAL HOLDINGS, INC., a Delaware corporation (the
"Company"), and Redeemable Warrants of the Company (one Redeemable Warrant
entitling the owner to purchase one fully paid and non-assessable share of
Common Stock) at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $______ per share of Common Stock and $______
per Redeemable Warrant, upon surrender of this Warrant Certificate and payment
of the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the Representative's Warrant Agreement dated
as of ________________, 1998 between the Company and SECURITY CAPITAL TRADING,
INC. (the "Warrant Agreement"). Payment of the Exercise Price shall be made by
certified or official bank check in New York Clearing House funds payable to
the order of the Company or by surrender of this Warrant Certificate, as
provided in Section 3 of the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, shall thereafter be void.
A-1
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the
rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at the principal office of the Company, a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other
governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
A-2
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of _________________, 1998
PROSPECT MEDICAL HOLDINGS, INC.
By:
----------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
Attest:
---------------------------------
Secretary
A-3
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to purchase:
___________ shares of Common Stock;
___________ Redeemable Warrants;
___________ shares of Common Stock together with an equal
number of Redeemable Warrants; or
___________ shares of Common Stock together with ____________
Redeemable Warrants,
and herewith tenders in payment for such securities a certified or official
bank check payable in New York Clearing House Funds to the order of Prospect
Medical Holdings, Inc. in the amount of $______________, all in accordance
with the terms of Section 3.1 of the Representative's Warrant Agreement dated
as of ______________, 1998 between Prospect Medical Holdings, Inc. and Security
Capital Trading, Inc. The undersigned requests that a certificate for such
securities be registered in the name of __________________________________
whose address is ___________________________________________ and that such
Certificate be delivered to _______________________________ whose address is
______________________________.
Dated: ______________, _____ Signature _____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
______________________________
A-4
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right, represented
by this Warrant Certificate, to purchase:
___________ shares of Common Stock;
___________ Redeemable Warrants;
___________ shares of Common Stock together with an equal
number of Redeemable Warrants; or
___________ shares of Common Stock together with ___________
Redeemable Warrants,
and herewith tenders in payment for such securities _______________ Warrants,
all in accordance with the terms of Section 3.2 of the Representative's Warrant
Agreement dated as of _______________, 1998 between Prospect Medical Holdings,
Inc. and Security Capital Trading, Inc. The undersigned requests that a
certificate for such securities be registered in the name of _________________
whose address is _____________________________________________ and that such
Certificate be delivered to _________________________________ whose address is
_________________________________.
Dated: _______________, _____ Signature ___________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
________________________________
A-5
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _____________________________ hereby sells, assigns and
transfers unto _______________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _____________, _____ Signature _____________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
_______________________________
A-6
