VOID AFTER 5:00 P.M., NEW YORK CITY TIME, ON APRIL 7, 2003 (UNLESS
EXTENDED PURSUANT TO SECTION 2 HEREOF) THIS WARRANT AND THE SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
Right to Purchase _________ Shares of
Common Stock, par value $.01 per share
Date: April 7, 1999
HENLEY HEALTHCARE, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, [Purchaser], or its registered
assigns, is entitled to purchase from HENLEY HEALTHCARE, INC., a corporation
organized under the laws of the State of Texas (the "COMPANY"), at any time or
from time to time during the period specified in Section 2 hereof, [___________]
fully paid and nonassessable shares of the Company's common stock, par value
$.01 per share (the "COMMON Stock"), at an exercise price per share (the
"EXERCISE PRICE") equal to $2.64. The number of shares of Common Stock
purchasable hereunder (the "WARRANT SHARES") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "WARRANTS" means this
Warrant and the other warrants of the Company issued pursuant to that certain
Securities Purchase Agreement, dated as of April 12, 1999, but effective as of
April 7, 1999, by and among the Company and the other signatories thereto (the
"SECURITIES PURCHASE AGREEMENT") and that certain Placement Agency Agreement
dated as of April 12, 1999, but effective as of April 7, 1999.
This Warrant is subject to the following terms, provisions and conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 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 by 11:59 p.m. New York time 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). 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 and the completed
Exercise Agreement shall have been delivered or, if such date is not a business
date, on the next succeeding business date. 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
three business days, after this Warrant shall have been so exercised (the
"DELIVERY PERIOD"). If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Warrant
Shares so purchased to the holder by crediting the account of the holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC
TRANSFER"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Company shall deliver to the holder physical certificates
representing the Warrant Shares so purchased. Further, the holder may instruct
the Company to deliver to the holder physical certificates representing the
Warrant Shares so purchased in lieu of delivering such shares by way of DTC
Transfer. Any certificates so delivered shall be in such denominations as may be
reasonably requested by the holder hereof, shall be registered in the name of
such holder or such other name as shall be designated by such holder and,
following the date on which the Warrant Shares have been registered under the
Securities Act pursuant to that certain Registration Rights Agreement, dated as
of April 12, 1999, but effective as of April 7, 1999, by and between the Company
and the other signatories thereto (the "REGISTRATION RIGHTS AGREEMENT") or
otherwise may be sold by the holder pursuant to Rule 144 promulgated under the
Securities Act (or a successor rule), shall not bear any restrictive legend. 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.
If, at any time, a holder of this Warrant submits this Warrant and an
Exercise Agreement, and the Company fails for any reason to deliver, on or prior
to the fifth business day following the expiration of the Delivery Period for
such exercise, the number of shares of Common Stock to which the holder is
entitled upon such exercise (an "EXERCISE DEFAULT"), then the Company shall pay
to the holder payments ("EXERCISE DEFAULT PAYMENTS") for an Exercise Default in
the amount of (a) (N/365), multiplied by (b) the Market Price (as defined in
Section 4(l) hereof) on the date the Exercise Agreement giving rise to the
Exercise Default is transmitted in accordance with this Section 1 (the "EXERCISE
DEFAULT DATE"), multiplied by (c) the number of shares of Common Stock the
2
Company failed to so deliver in such Exercise Default, multiplied by (d) .24,
where N = the number of days from the Exercise Default Date to the date that the
Company effects the full exercise of this Warrant which gave rise to the
Exercise Default. The accrued Exercise Default Payment for each calendar month
shall be paid in cash or shall be convertible into Common Stock, at the holder's
option, as follows:
(a) In the event holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event holder elects to take such payment in Common Stock,
the holder may convert such payment amount into Common Stock (in accordance with
the terms contained in Article IV of the Statement of Designation of Rights and
Preferences (the "STATEMENT OF DESIGNATION") governing the Company's Series C
Convertible Preferred Stock (the "SERIES C PREFERRED STOCK")) at the lower of
the Exercise Price or the Market Price (as defined in Section 4(l)) (as in
effect at the time of conversion) at any time after the fifth day of the month
following the month in which it has accrued.
Nothing herein shall limit the holder's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of Common Stock as required pursuant to the terms of Section 3(b) hereof
or to otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
2. PERIOD OF EXERCISE.
(a) This Warrant is immediately exercisable, at any time or from time to
time on or after the date of initial issuance of this Warrant (the "ISSUE DATE")
and before 5:00 p.m., New York City time, on that date which is [_____________]
months after the Issue Date (the "EXERCISE PERIOD"). The Exercise Period shall
automatically be extended (i) by one (1) day for each day on which the Company
does not have a number of shares of Common Stock reserved for issuance upon
exercise hereof at least equal to the number of shares of Common Stock issuable
upon exercise hereof and (ii) for so long as (A) a Redemption Event (as defined
in the Statement of Designation) shall have occurred and be continuing or (B)
any event shall have occurred and be continuing which, with the passage of time
or the giving of notice and the failure to cure, would result in a Redemption
Event.
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a suf-
3
ficient number of shares of Common Stock to provide for the exercise in full of
this Warrant (without giving effect to the limitations on exercise set forth in
Section 7(g) hereof).
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become 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; PROVIDED, HOWEVER,
that the holder of this Warrant acknowledges and agrees that the Company will be
required to obtain shareholder approval for the issuance of the shares of Common
Stock issuable upon exercise of this Warrant in excess of the Cap Amount (as
defined in the Statement of Designation).
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed 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 economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality 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
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
(f) BLUE SKY LAWS. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price
and the number of Warrant Shares issuable hereunder and for which this Warrant
is then exercisable
4
pursuant to Section 2 hereof shall be subject to adjustment from time to time as
provided in this Section 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 or down
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE. Except as otherwise provided in
Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells, or in accordance with Section 4(b) hereof is deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Dilutive Price (as defined in this
subparagraph) on the date of issuance (a "DILUTIVE ISSUANCE"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with one of the two formulas below. For purposes of this
subparagraph, "DILUTIVE PRICE" means (i) the Floor Price (as defined in the
Statement of Designation) if, prior to the date of the Dilutive Issuance, the
Company has met both Performance Milestones (as defined in the Statement of
Designation), or (ii) otherwise, the Market Price (as hereinafter defined). If
the Company has met both Performance Milestones (as defined in the Statement of
Designation), the Exercise Price will be adjusted in accordance with the
following formula:
E' = E x O + P/F ;
--------------
CSDO
or otherwise in accordance with the following formula:
E' = E x O + P/M ;
--------------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in Section
4(1)(ii));
F = the Floor Price (as defined in the Statement of Designation)
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth
in Section 4(b) hereof, received by the Company upon
such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock deemed
outstanding immediately after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for
5
or to purchase Common Stock or other securities exercisable, 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 Dilutive Price in
effect on the date of issuance of such Options ("BELOW MARKET OPTIONS"), then
the maximum total number of shares of Common Stock issuable upon the exercise of
all such Below Market Options (assuming full exercise, conversion or exchange of
Convertible Securities, if applicable) will, as of the date of the issuance or
grant of such Below Market 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 Below Market 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 Below Market Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Below Market Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Below Market Options,
the minimum aggregate amount of additional consideration payable upon the
exercise, conversion or exchange thereof at the time such Convertible Securities
first become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below
Market 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 Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES.
(A) If the Company in any 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 exercise, conversion or exchange (as
determined pursuant to Section 4(b)(ii)(B) if applicable) is less than the
Dilutive Price in effect on the date of issuance of such Convertible Securities,
then the maximum total number of shares of Common Stock issuable upon the
exercise, 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 exercise, 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 exercise, conversion or exchange thereof at
the time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, 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 exercise, conversion or exchange of
such Convertible Securities.
6
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Dilutive Price on the date
of issuance of such Convertible Security was 75% of the Dilutive Price on such
date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Dilutive Price at
any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment under this Section 4 with
respect to any Variable Rate Convertible Security, the Exercise Price in effect
at such time shall be readjusted to equal the Exercise Price which would have
resulted if the Assumed Variable Market Price at the time of issuance of the
Variable Rate Convertible Security had been 75% of the Dilutive Price existing
at the time of the adjustment required by this sentence.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
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 exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, 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
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to exercise, 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, 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
market value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be
7
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 merger or
consolidation in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair market 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 market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the Issue Date and
set forth on Schedule 3(c) of the Securities Purchase Agreement in accordance
with the terms of such securities as of such date or (ii) upon the grant or
exercise of any stock or options which may hereafter be granted or exercised
under any employee benefit 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 non-employee members of the Board of Directors of the Company or
a majority of the members of a committee of non-employee directors established
for such purpose; or (iii) upon the issuance of securities pursuant to an
underwriters public offering.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock 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 during the Exercise Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock 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
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant and for which this
Warrant is or may become exercisable 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 or for which this Warrant is or
may become exercisable (as applicable) 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 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 at any time during the Exercise Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder
8
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, cash 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 Section 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 Warrant 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. Notwithstanding the foregoing, in the event of any
consolidation of the Company with, or merger of the Company into, any other
corporation, or the sale or conveyance of all or substantially all of the assets
of the Company, at any time during the Exercise Period, the holder of the
Warrant shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal to the fair market value of this Warrant
as determined in accordance with customary valuation methodology used in the
investment banking industry.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, stock repurchase by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "DISTRIBUTION"), at any time during the
Exercise Period, then 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 (or rights) 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
9
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
(other than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) 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 reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
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 dividend, 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 estimate 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,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least twenty (20)
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. Notwithstanding the foregoing, the Company shall
publicly disclose the substance of any notice delivered hereunder prior to
delivery of such notice to the holder of this Warrant.
(k) CERTAIN EVENTS. If, at any time during the Exercise Period, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 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.
10
(i) "MARKET PRICE," as of any date, (i) means the average of
the closing bid prices for the shares of Common Stock as reported on The Nasdaq
SmallCap Market ("NASDAQ SMALLCAP") by Bloomberg Financial Markets ("BLOOMBERG")
for the ten consecutive trading days immediately preceding such date, or (ii) if
Nasdaq SmallCap is not the principal trading market for the shares of Common
Stock, the average of the closing bid prices as reported by Bloomberg on the
principal trading market for the Common Stock during the same period, or, if
there is no sale price for such period, the last reported bid price as reported
by Bloomberg for such period, or (iii) if market value cannot be calculated as
of such date on any of the foregoing bases, the Market Price shall be the
average fair market value as reasonably determined by an investment banking firm
selected by the Company and reasonably acceptable to the holder, with the costs
of the appraisal to be borne by the Company. 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.
(ii) "COMMON STOCK," for purposes of this Section 4, includes
the Common Stock 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 Common Stock 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 Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
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
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, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
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 Section 7(e)
below, PROVIDED, HOWEVER, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) 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
contrary.
11
Notwithstanding anything to the contrary contained herein, the registration
rights described in Section 8 hereof are assignable only in accordance with the
provisions of the Registration Rights
Agreement.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Warrants of
like tenor of different denominations 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 evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of 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
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly cancelled 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 Section 7. The Company shall indemnify
and reimburse the holder of this Warrant for all losses and damages arising as a
result of or related to any breach of the terms of this Warrant, including costs
and expenses (including legal fees) incurred by such holder in connection with
the enforcement of its rights hereunder.
(e) WARRANT REGISTER. The Company shall maintain, at its principal
executive 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 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 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 shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws (the cost of which shall be borne by the Company if
the Company's counsel renders such an opinion and up to $250 of such cost shall
be borne by the Company if the holder's counsel is requested to render such
opinion), (ii) that the
12
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.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER. Notwithstanding
anything contained herein to the contrary, this Warrant shall not be exercisable
by a holder hereof to the extent (but only to the extent) that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
(including the Series C Preferred Stock) subject to a limitation on conversion
or exercise analogous to the limitation contained herein) and (b) the number of
shares of Common Stock issuable upon exercise of the Warrant (or portion
thereof) with respect to which the determination described herein is being made,
would result in beneficial ownership by such holder and its affiliates of more
than 4.99% of the outstanding shares of Common Stock. To the extent the above
limitation applies, the determination of whether and to what extent this Warrant
shall be exercisable with respect to other securities owned by such holder shall
be in the sole discretion of the holder and submission of this Warrant for full
or partial exercise shall be deemed to be the holder's determination of whether
and the extent to which this Warrant is exercisable, in each case subject to
such aggregate percentage limitation. No prior inability to exercise the Warrant
pursuant to this Section shall have any effect on the applicability of the
provisions of this Section with respect to any subsequent determination of
exerciseability. 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 (a) hereof. Except as provided in the immediately
succeeding sentence, the restrictions contained in this Section 7(g) may not be
amended without the consent of the holder of this Warrant and the holders of a
majority of the Company's then outstanding Common Stock.
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 the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
9. NOTICES. Any notices required or permitted to be given under the terms
of this Warrant shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective upon receipt or refusal of receipt, if delivered personally
or by courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
13
If to the Company:
HENLEY HEALTHCARE, INC.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
10. GOVERNING LAW; JURISDICTION. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York, without regard to
principles of choice of law or conflicts of law that would defer to the
substantive law of another jurisdiction. The Company irrevocably consents to the
jurisdiction of the United States federal courts and state courts located in the
State of New York in any suit or proceeding based on or arising under this
Warrant and irrevocably agrees that all claims in respect of such suit or
proceeding shall be determined exclusively in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's right to serve process in any other manner permitted by law. The
Company agrees 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.
11. MISCELLANEOUS.
(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
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
(c) BUSINESS DAY. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
HENLEY HEALTHCARE, INC.
By: /s/ XXXXXXX X. XXXXXXX
Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: HENLEY HEALTHCARE, INC.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxx Xxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attn: Chief Financial Officer
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of HENLEY HEALTHCARE, INC., a
corporation organized under the laws of the State of Texas (the "COMPANY"),
evidenced by the attached Warrant, in accordance with the conditions and
provisions of said Warrant. The undersigned shall submit as payment for such
purchase, at the option of the Company, either (i) an amount equal to the
product of the Exercise Price multiplied by the number of shares being purchased
hereby, or (ii) forfeiture of a number of shares of Common Stock which would
have been issuable under the Warrant equal to the aggregate Exercise Price
payable for such exercise divided by the Market Price. All capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such
terms in the Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise dispose
of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
[ ] The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee (which
is _________________) with DTC through its Deposit Withdrawal Agent
Commission System ("DTC TRANSFER").
[ ] In lieu of receiving the shares of Common Stock issuable pursuant to this
Exercise Agreement by way of DTC Transfer, the undersigned hereby requests
that the Company cause its transfer agent to issue and deliver to the
undersigned physical certificates representing such shares of Common
Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
Dated:_________________ _____________________________________
Signature of Holder
_____________________________________
Name of Holder (Print)
Address:
_____________________________________
_____________________________________
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 transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _____________________, ____
In the presence of
______________________
Name: _____________________________________
Signature:________________________________
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.
