THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE TRANSFERRED IN VIOLATION OF THE ACT, THE RULES AND
REGULATIONS THEREUNDER, ANY APPLICABLE STATE SECURITIES LAW OR THE PROVISIONS OF
THIS WARRANT.
No. of Shares of Common Stock: **81,081**
WARRANT
To Purchase Common Stock of
SYNETIC HEALTHCARE COMMUNICATIONS, INC.
THIS IS TO CERTIFY THAT THE HEALTH INFORMATION NETWORK CONNECTION LLC, a
New York limited liability company, or its registered and permitted assigns, is
entitled, at any time during the Exercise Period (as hereinafter defined), to
purchase from SYNETIC HEALTHCARE COMMUNICATIONS, INC., a Delaware corporation
(the "Company"), Eighty-One Thousand Eighty-One (81,081) shares of Common Stock
(as hereinafter defined and subject to adjustment as provided herein), in whole
or in part, including fractional parts, at the Applicable Warrant Price (as
hereinafter defined and subject to adjustment as set forth herein), all on the
terms and conditions and pursuant to the provisions hereinafter set forth.
ARTICLE I
DEFINITIONS
As used in this Warrant, the following terms have the respective meanings
set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued or issuable (whether upon the exercise of warrants, Convertible
Securities or otherwise) by the Company after the Effective Date, other than
Warrant Stock.
"Affiliate" shall mean with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by or under
direct or indirect common control with such person or entity. For purposes of
this definition, the term "control" (including correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting securities, by
contract or otherwise.
"Applicable Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date. On any such date, such
price shall equal the following: (a) if there occurs an Initial Public Offering
of the Common Stock by such date, then the lesser of (i) the Initial Public
Offering Price of the Common Stock and (ii) the Non-IPO Price; or (b) if an
Initial Public Offering of the Common Stock does not occur by such date, then
the Non-IPO Price, in each case subject to adjustment as provided herein;
provided, however, that, notwithstanding anything to the contrary contained
herein, the Applicable Warrant Price shall not be less than the par value of a
share of Common Stock.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Cashless Exercise" shall have the meaning set forth in Section 2.2(c).
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, par value $.01 per share, of the Company, and any capital
stock into which such Common Stock may thereafter be changed, and shall also
include (a) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (b) shares of Common Stock of any successor or acquiring
corporation (as defined in Section 4.7) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.7; provided, however, that this shall not include any shares of Common
Stock acquired by the exercise of this Warrant whether in full or in part.
"Company" shall have the meaning set forth in the introductory
paragraph hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock, warrants, rights or other securities which are exercisable, convertible
or exchangeable, (including, but not limited to, Options) with or without
payment of additional consideration in cash or property, for Additional Shares
of Common Stock, either immediately or upon the occurrence of a specified date
or the happening of a specified event or both.
"Current Market Price" shall mean in respect of any share of Common Stock
on any date herein specified, the lower of (a) the average of the daily market
prices for 15
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consecutive Business Days commencing twenty-five (25) days before such date and
(b) the daily market price on the most recent Business Day prior to such date.
The daily market price for each such Business Day shall be the last reported
sale price on such day on the principal stock exchange on which such Common
Stock is then listed or admitted to trading or, if the Common Stock is not so
listed or admitted, the last reported sale price on such day on the National
Association of Securities Dealers, Inc. Automated Quotation National Market
System ("NASDAQ") or any other over-the-counter market or trading facility on
which such Common Stock is then listed; provided, however, that if no sale takes
place on such day on any such exchange, market or trading facility, the average
of the last reported closing bid and ask prices on such day as officially quoted
on such exchange, market or trading facility shall be the daily market price for
such Business Day; provided, further, that if the Common Stock is not listed or
admitted to trade on a stock exchange and is not quoted on NASDAQ, or any other
over-the-counter market or trading facility, the Current Market Price shall be
the Fair Market Value.
"Cut-Back Event" shall have the meaning set forth in Section 7.3(a).
"Demand Registration" shall have the meaning set forth in Section 7.2.
"Effective Date" shall mean January 1, 1999.
"Exercise Period" shall mean the date or period, as the case may be, on or
during which this Warrant is exercisable pursuant to Section 2.2; provided,
however, that such date or period shall be extended in order to permit the
Holder to comply as necessary with the pre-merger notification requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and to
obtain the consents of the United States Department of Justice and the United
States Federal Trade Commission to the exercise of this Warrant by the Holder.
"Expiration Date" shall mean January 1, 2006; provided, however, that if
the Management Services Agreement is terminated by THINC pursuant to Section 8.6
thereof due to a failure by the Company to meet certain performance standards,
then the Expiration Date shall be the one-hundred and eightieth (180th) day
following the date of such termination.
"Fair Market Value" shall mean in respect of a share of Common Stock on
any date herein specified, the fair value as determined in good faith by the
Board of Directors of the Company, subject to the provisions of Section 4.6(e).
"Healthcare Communications Business" shall mean the provision of on-line
prescription, laboratory and managed care transaction and messaging services
(the "Services") that connect physicians with healthcare payers, pharmacies and
laboratories, which shall include, without limitation, connection to, and
management of Services with, all pharmaceutical benefits management systems;
connection to, and management of Services with, all payer systems (including
third party payers and direct payers (e.g.,
3
employers)); connection to, and management of Services with, all physicians and
other provider systems; connection to, and management of Services with,
healthcare suppliers (e.g., pharmacies, laboratories); connection to, and
management of Services with, consumers; and connection to, and management of
services with, other data switches (e.g., clearing houses).
"Holder" shall mean the Person in whose name this Warrant is registered on
the books of the Company maintained for such purpose.
"Incidental Registration" shall have the meaning set forth in Section
7.3.
"Initial Public Offering" means an initial underwritten public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act, in connection with which the Company's Common Stock
first becomes listed or admitted to trading on a national stock exchange, or
traded and quoted on NASDAQ or any other over-the-counter market or trading
facility.
"Initial Public Offering Price" shall mean the amount of consideration
paid by the public per share of Common Stock in connection with an Initial
Public Offering (not subtracting any commissions, discounts or other expenses
incurred in connection with the Initial Public Offering and any related
underwriting).
"Management Services Agreement" shall mean the Management Services
Agreement entered into concurrently herewith between the Company and Synetic
Healthcare Communications, Inc., a Delaware corporation, as such agreement may
be amended, supplemented and/or extended from time to time.
"Majority Holders" shall have the meaning set forth in Section 4.6(e).
"NASDAQ" shall have the meaning set forth in the paragraph hereof defining
"Current Market Price".
"Non-IPO Price" shall mean in respect of a share of Common Stock the price
equal to $200.00.
"Option" means any right, warrant or option to subscribe for or purchase
shares of Common Stock.
"Other Property" shall have the meaning set forth in Section 4.7.
"Outstanding" shall mean, when used with reference to the Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or its subsidiaries, and all shares issuable in respect
of outstanding scrip or any certificates representing fractional interests in
shares of Common Stock.
4
"Parent" shall mean Synetic, Inc., the corporate parent of the Company.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof) and other
organizations, whether or not legal entities.
"Register" shall have the meaning set forth in Section 2.1.
"Registrable Shares" shall mean shares of Common Stock issued or issuable
upon the exercise of this Warrant.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Shareholders" shall mean Persons holding Common Stock of the
Company and entitled to register such Common Stock under the Securities Act
pursuant to a registration agreement with the Company, other than holders of
Registrable Shares.
"THINC" shall mean THE HEALTH INFORMATION NETWORK CONNECTION LLC, a New
York limited liability company.
"Warrants" shall mean this Warrant and all Warrants issued upon the
partial exercise, transfer, division or combination of, or in substitution for,
any thereof. All Warrants shall at all times be identical as to terms and
conditions and date, except as to the number of shares of Common Stock for which
they may be exercised.
"Warrant Price" shall mean an amount equal to (a) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.2 multiplied by (b) the Applicable Warrant Price.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
Holder upon the exercise of this Warrant; provided that if under the terms
hereof there shall be a change such that the securities purchasable hereunder
shall be issued by an entity (other than the Company) or there shall be a change
in the type or class of securities purchasable hereunder, then the term shall
mean the securities issued or issuable upon the exercise of the rights granted
hereunder.
5
ARTICLE II
REGISTRATION; EXERCISE OF WARRANT
2.1 Registration. The Company shall register this Warrant, upon records to
be maintained by the Company for that purpose (the "Register"), in the name of
the Holder of such Warrant. The Register shall include the Holder's name,
address (as provided to the Company by the Holder), the number of Warrants
registered in such Holder's name, and any other information pertaining to the
Warrants or the Holder that the Board of Directors of the Company reasonably
deems appropriate. The Company may deem and treat the registered Holder of this
Warrant as the absolute owner thereof for the purpose of any exercise thereof or
any distribution to the Holder thereof, and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
2.2 Manner of Exercise. (a) This Warrant may be exercised for all or any
part of the number of shares of Common Stock purchasable hereunder either (i)
before 5:00 P.M., New York City time, on any Business Day during the period from
the date that is one-hundred and eighty (180) days following the occurrence of
an Initial Public Offering (in which Parent is not selling any Common Stock
held, directly or indirectly, by Parent) which takes place on or prior to the
Expiration Date to the later of (A) the Expiration Date and (B) the date that is
one hundred eighty five (185) days following the date of such Initial Public
Offering; (ii) if an Initial Public Offering occurs in which Parent is selling
any Common Stock held, directly or indirectly, by Parent, then before 5:00 p.m.,
New York City time, on any Business Day during the period from the date of the
Initial Public Offering to the later of (A) the Expiration Date and (B) the date
that is five (5) days following the date of such Initial Public Offering; or
(iii) if an Initial Public Offering has not so occurred, then before 5:00 P.M.,
New York City time, on any Business Day during the fifteen (15)-day period
immediately following the Expiration Date.
(b) In order to exercise this Warrant, in whole or in part, the
Holder shall deliver to the Company at the office designated by the Company
pursuant to Section 12.8, (i) a written notice of the Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price in the manner provided
below, and (iii) this Warrant. Such notice shall be substantially in the form of
the subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by the Holder or its agent or attorney duly authorized in writing. Upon
receipt thereof, the Company shall, as promptly as practicable, execute or cause
to be executed and deliver or cause to be delivered to the Holder a certificate
or certificates representing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereinafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as the Holder shall request in the notice and shall be registered
in the name of the Holder. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued and the
6
Holder shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with the cash or check or checks,
if any, and this Warrant, are received by the Company as described above and all
taxes required to be paid by the Holder, if any, prior to the issuance of such
shares, have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the unpurchased shares of Common Stock called
for by this Warrant, which new Warrant shall in all other respects be identical
with this Warrant, or, at the sole discretion of the Company, appropriate
notation may be made on this Warrant and the same returned to the Holder. The
issuance of Warrant Stock shall be made without charge to the Holder for any
issuance tax with respect thereto or any other cost incurred by the Company in
connection with the exercise of this Warrant and the related issuance of Warrant
Stock; provided the Holder provides the Company or its agent with any report,
document or certificate required by applicable law in order to avoid the
imposition of such taxes or other costs. Notwithstanding any provision herein to
the contrary, the Company shall not be required to register shares in the name
of any Person who acquired this Warrant (or part hereof) or any Warrant Stock
otherwise than in accordance with this Warrant. Payment of the Warrant Price
shall be made in same-day funds by certified or official bank check, or wire
transfer.
(c) If the Company's Common Stock is listed on a national securities
exchange or quoted on NASDAQ or any other over-the-counter market or trading
facility, the Holder may also exercise this Warrant during the Exercise Period
for all or any part of the number of shares of Common Stock purchasable
hereunder, in a "cashless" or "net-issue" exercise (a "Cashless Exercise") by
delivery to the Company at the office designated by the Company pursuant to
Section 12.8, (i) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, and (ii) this Warrant. Such notice shall be substantially in the form
of the cashless exercise form appearing at the end of this Warrant as Exhibit B,
duly executed by the Holder or its agent or attorney duly authorized in writing.
In the event of a Cashless Exercise, the Holder shall exchange this Warrant for
that number of shares of Common Stock determined by dividing (A) the product
received by multiplying that portion of the total number of shares of Common
Stock purchasable hereunder which the Holder elects to exercise in this Cashless
Exercise by the excess of (X) the Current Market Price over (Y) the Applicable
Warrant Price, and (B) the Current Market Price. The cashless exercise form
shall set forth the calculation upon which the Cashless Exercise is based.
2.3 Payment of Taxes. The Company shall pay all stock transfer taxes and
similar governmental charges that may be imposed with respect to the issuance of
Warrant Stock upon the exercise of this Warrant; provided, however, that the
Company shall not be required to pay any tax or other charge imposed in
connection with any transfer of this Warrant or the issuance or delivery of
certificates for shares of Warrant Stock or other securities in respect of the
shares of Warrant Stock upon the exercise of Warrants, to a person or entity
other than a then existing Holder of Warrants; provided,
7
further, that the Company shall not be required to pay any income or other
similar tax levied on any Holder of Warrants.
2.4 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of this Warrant. As to any
fraction of a share which the Holder of this Warrant, the rights under which are
exercised in the same transaction, would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price on
the date of notice of exercise. Payment of such amount shall be made in cash or
by check payable to the order of the Holder at the time of delivery of any
certificate or certificates arising upon such exercise.
2.5 Restrictive Legend. Each certificate for Warrant Stock issued upon the
exercise of this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS EITHER
(1) SUCH SHARES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR (2) AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND LEGAL COUNSEL OF THE HOLDER OF SUCH SHARES (WHICH COUNSEL IS
REASONABLY SATISFACTORY TO THE COMPANY) PROVIDES AN OPINION TO SUCH EFFECT
TO THE COMPANY."
The Company shall, upon the request of any holder of a stock certificate bearing
the foregoing legend and the surrender of such certificate, issue a new stock
certificate without such legend if such holder shall have delivered to the
Company a legal opinion reasonably satisfactory to the Company to the effect
that the restrictions set forth herein are no longer required or necessary under
the Securities Act or any applicable state law.
ARTICLE III
TRANSFERS
This Warrant and all rights hereunder are non-transferable, and may not be
sold, transferred, pledged, hypothecated, or assigned without the prior written
consent of the Company (which may be withheld in the Company's sole discretion),
except in connection with the distribution of all the assets of the Holder
pursuant to a liquidation, dissolution or winding up of the affairs of the
Holder, or the sale of all or substantially all of the Holder's assets or a
merger or consolidation of the Holder where the Holder is not the surviving
entity; provided, however, in no event may a Holder make any transfer to a
8
direct competitor of the Company. Any such prohibited transfer made without the
Company's consent shall be void ab initio. Any permitted transferee shall agree
to be bound by all provisions of this Warrant.
ARTICLE IV
ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this Article IV; provided, however, that, notwithstanding anything to the
contrary contained herein, the Applicable Warrant Price shall not be less than
the par value of a share of Common Stock. The Company shall give the Holder
notice of any event described below which requires an adjustment pursuant to
this Article IV as soon as practicable following the occurrence of such event,
which notice shall state the exercise price resulting from such adjustment
and/or the increase or decrease, if any, in the number of shares of Common Stock
or other stock or property issuable upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
4.1 Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(a) pay a dividend or make a distribution on its Common Stock in
Additional Shares of Common Stock (this adjustment will be deemed to occur
immediately after the record date);
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Applicable Warrant Price
shall be adjusted to equal (A) the Applicable Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment.
4.2 Issuance of Additional Shares of Common Stock. (a) If at any time the
Company shall (except as hereinafter provided in Section 4.2(b)) issue or sell
any Additional Shares of Common Stock and such Additional Shares of Common Stock
are
9
issued or sold for no consideration or for consideration in an amount per
additional share of Common Stock less than the Fair Market Value then the
Applicable Warrant Price shall be reduced to a price determined by multiplying
(i) the Applicable Warrant Price, by (ii) a fraction, (A) the numerator of which
is the sum of (1) the number of shares of Common Stock Outstanding immediately
prior to such issuance or sale, plus (2) an amount equal to the quotient arrived
at by dividing the aggregate consideration, if any, received by the Company upon
such issuance or sale, by the Fair Market Value per share of the shares so
issued or sold, and (B) the denominator of which is the number of shares of
Common Stock Outstanding immediately after such issuance or sale.
(b) The provisions of Section 4.2(a) shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is provided under
Sections 4.1 or 4.7. No adjustment of the number of shares of Common Stock for
which this Warrant shall be exercisable or the Applicable Warrant Price shall be
made under Section 4.2(a) upon the issuance of any Additional Shares of Common
Stock which are issued pursuant to the exercise, conversion or exchange of any
Convertible Securities.
4.3 Issuance of Convertible Securities. If at any time the Company shall
issue or sell, any Convertible Securities, and the price per share for which
Common Stock issuable upon the exercise, conversion or exchange of such
Convertible Securities shall be less than the Fair Market Value in effect
immediately prior to the time of such issue or sale, then the Applicable Warrant
Price shall be adjusted as provided in Section 4.2(a) on the basis that (a) the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such Convertible Securities shall be deemed to have been issued and outstanding,
(b) the price per share for such Additional Shares of Common Stock shall be
deemed to be the lowest possible price per share in any range of prices per
share at which such Additional Shares of Common Stock are available to such
holders, and (c) the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such
Convertible Securities. No further adjustments of the Applicable Warrant Price
shall be made upon the actual issue of Additional Shares of Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
4.4 Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which this Warrant is exercisable shall
have been made pursuant to Section 4.3 as the result of any issuance of
Convertible Securities, and either
(a) the right of exercise, conversion or exchange for such
Convertible Securities, shall expire and all or a portion of such rights with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to such Convertible Securities, shall be increased,
10
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such Convertible
Securities on the then outstanding Warrants, but not on any then outstanding
Warrant Stock, on the basis of
(c) treating the number of Additional Shares of Common Stock
theretofore actually issued or issuable pursuant to the previous exercise,
conversion or exchange, as having been issued on the date or dates of any such
exercise, conversion or exchange and for the consideration actually received and
receivable therefor, and
(d) treating any such Convertible Securities which then remain
outstanding as having been granted or issued immediately after the time of such
increase of the consideration per share for which shares of Common Stock are
issuable under such Convertible Securities.
4.5 Liquidation; Dissolution. If the Company shall dissolve, liquidate or
wind up its affairs, the Holder shall have the right, but not the obligation, to
exercise this Warrant effective as of the date of such dissolution, liquidation
or winding up; provided that written notice of such intent to exercise is
delivered to the Company within ten (10) business days of the date that the
Holder receives written notice of the Company's intent to dissolve, liquidate or
wind up its affairs. If any such dissolution, liquidation or winding up results
in any cash distribution to the Holder in excess of the Applicable Warrant Price
for the shares of Common Stock for which this Warrant is exercised, then the
Holder may, at its option, exercise this Warrant without making payment of such
Applicable Warrant Price and, in such case, the Company shall, upon distribution
to the Holder, consider such Applicable Warrant Price to have been paid in full,
and in making such settlement to the Holder, shall deduct an amount equal to
such Applicable Warrant Price from the amount payable to the Holder.
4.6 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable provided
for in this Article IV:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Company therefor shall be the
amount of the cash received by the Company therefor, or, if such Additional
Shares of Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends, but not subtracting any
11
compensation, discounts or expenses paid or incurred by the Company for and in
the underwriting of, or otherwise in connection with, the issuance thereof). To
the extent that such issuance shall be for a consideration other than cash,
then, except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Board of Directors of
the Company. The consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Convertible Securities shall be the
consideration, if any, received by the Company for issuing such Convertible
Securities, plus the consideration paid or payable to the Company in respect of
the subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange of such Convertible Securities. In case of the issuance
at any time of any Additional Shares of Common Stock or Convertible Securities
in payment or satisfaction of any dividends upon any class of stock other than
Common Stock, the Company shall be deemed to have received for such Additional
Shares of Common Stock or Convertible Securities consideration equal to the
amount of such dividend so paid or satisfied.
(b) When Adjustments Are Made. The adjustments required by this
Article IV shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which this Warrant is exercisable or of the Applicable Warrant
Price that would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for in
Section 4.1) up to, but not beyond, the date of exercise if such adjustment
either by itself or with other adjustments not previously made adds or subtracts
less than one percent (1%) of the shares of Common Stock for which this Warrant
is exercisable or of the Applicable Warrant Price immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Article IV and not previously made, would result in a minimum
adjustment, but in no event later than the date of exercise of this Warrant. For
the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Article IV, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled. The adjustments pursuant to this
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Article IV shall not apply to: (i) any Convertible Securities which are issued
to officers, directors, employees, or consultants of the Company pursuant to a
bona fide plan or plans adopted in good faith by the Board of Directors of the
Company, to the extent such Securities may be exchanged for, converted into, or
exercised to acquire Additional Shares of Common Stock in an amount not
exceeding ten (10%) percent of the then outstanding Common Stock of the Company;
(ii) any Additional Shares of Common Stock issued to such officers, directors,
employees, or consultants of the Company upon the exchange, conversion or
exercise of the Convertible Securities described in the immediately preceding
clause (i), subject to the same limitation set forth therein; (iii) Additional
Shares of Common Stock issued to acquire, or in the acquisition of, all or any
portion of, or to invest in, a business, in an arm's-length transaction between
the Company and a third party which is not an Affiliate of the Company, whether
such acquisition or investment shall be effected by purchase of assets, exchange
of securities, merger, consolidation or otherwise, provided that the Company
shall have obtained a valuation or determination from any independent firm of
certified public accountants or investment banking firm, in either case of
recognized national standing, which indicates that such Additional Shares of
Common Stock were issued for consideration in an amount not less than fair
market value; (iv) Additional Shares of Common Stock issued in a bona fide
public offering pursuant to a firm commitment underwriting or sales at the
market pursuant to a continuous offering stock program; (v) Additional Shares of
Common Stock issued in any private placement or other transaction exempt from
the registration requirements of the Securities Act pursuant to a firm
commitment underwriting, provided that the Company shall have obtained a
valuation or determination from any independent firm of certified public
accountants or investment banking firm, in either case of recognized national
standing, which indicates that such Additional Shares of Common Stock were
issued for consideration in an amount not less than fair market value; (vi)
rights to purchase Additional Shares of Common Stock or issuance of Additional
Shares of Common Stock pursuant to a dividend reinvestment plan or other plan
hereafter adopted for the reinvestment of dividends or interest; (vii) a change
in the par value or no par value of the Common Stock (other than as a
consequence of an event described in Section 4.1(b), 4.1(c) or 4.7 for which an
adjustment to the number of Shares of Common Stock for which the Warrant is
exercisable is required pursuant to such Section 4.1(b), 4.1(c) or 4.7); or
(viii) non-stock dividends or distributions paid by the Company, except to the
extent otherwise provided in Section 4.9. In addition, to the extent that the
Warrants become exercisable for cash, no interest shall accrue on such cash.
(e) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Company shall be required to make a determination in good faith
of the fair value of any item under this Article IV, such determination may be
challenged in good faith by the Holders entitled to receive in excess of fifty
percent (50%) of the aggregate number of shares of Common Stock then purchasable
upon exercise of this Warrant, whether or not then exercisable (the "Majority
Holders"), and any dispute shall be resolved by an accounting or investment
banking firm of recognized standing selected by the Company and reasonably
acceptable to the Holders of a majority of the aggregate
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number of Shares of Common Stock then purchasable upon exercise of this Warrant.
Any such challenge must be made by delivery of written notice thereof to the
Company not later than fifteen (15) Business Days following the date that the
Company provides the Majority Holders written notice of such determination. For
the purposes of clarification and not limitation, no challenge may be made under
this Section 4.6(e) in respect of any of the events described in Section 4.6(d),
subject to the conditions in Section 4.6(d).
4.7 Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation, a reverse triangular merger in which
the Company is the surviving entity but the shares of the Company's Capital
Stock outstanding immediately prior to the merger are converted, by virtue of
the merger, into other property, whether in the form of cash, securities or
otherwise, or where there is a change in or distribution with respect to the
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another Person and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of Common Stock of any successor
or acquiring corporation or of the Company (as applicable), or any cash, shares
of stock or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) in addition to or in lieu of
Common Stock of the successor or acquiring corporation or of the Company (as
applicable) ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company, then the Holder shall have the right
thereafter to receive, upon exercise of such Warrant, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event; provided, however, that
this Section 4.7 shall not apply to the extent any action causes an adjustment
to be made pursuant to Sections 4.1, 4.2, or 4.3 hereof. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined in good faith by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of shares of the Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Article IV. For purposes of this Section 4.7 "Common Stock of any
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
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specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.7 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or dispositions of assets and to the stock or securities of any other
corporation that are at the time receivable by the Holders upon the exercise of
this Warrant.
4.8 Reclassifications. If the Company changes any of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Applicable
Warrant Price therefore shall be appropriately adjusted.
4.9 Extraordinary Dividends. If the Company declares and pays an
extraordinary dividend (i.e., a dividend that is inconsistent with the Company's
dividend policy adopted by the board other than an initial dividend), and the
failure thereupon to make any adjustment pursuant to this Article IV would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles hereof, then, in such case, the Company
shall appoint a firm of independent certified public accountants of recognized
national standing (which may be the regular independent auditors of the Company)
or independent investment banking firm of recognized national standing, which
shall give their opinion upon the adjustment, if any, on a basis consistent with
the essential intent and principles established in this Article IV, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the Holder of this Warrant and shall make the adjustment, if any, described
therein.
4.10 Other Notices. In case at any time:
(a) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with another corporation (other than a subsidiary of the Company in which the
Company is the surviving or continuing corporation and no change occurs in the
Company's Common Stock), or sale of all or substantially all of its assets to,
another corporation;
(b) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Company; or
(c) the Company shall declare any non-cash dividend on its Common
Stock;
then, in any one or more of said cases, the Company shall give written
notice, addressed to the Holder at the address of such Holder as shown on the
Register, of the date (or, if not then known, a reasonable approximation thereof
by the Company) on
15
which such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, bankruptcy, assignment for the benefit of creditors,
winding up or other action or dividend, as the case may be, shall take place.
Such notice shall also specify (or, if not then known, reasonably approximate)
the date as of which the holders of Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation merger, sale, dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, winding up, or
other action, or the date of such dividend, as the case may be. Such notice
shall be mailed to the Holder at least twenty days prior to the record date for
such action in the case of any action described in Subsection (a) or Subsection
(c) above, and in the case of any action described in Subsection (b) above, at
least twenty days prior to the date on which the action described is to take
place and at least twenty days prior to the record date for determining holders
of Common Stock entitled to receive securities and/or other property in
connection with such action.
As soon as practicable following any adjustment of the Applicable
Warrant Price and/or the number of shares of Common Stock purchasable upon
exercise of this Warrant, a certificate, signed by (i) the Company's President
or Chief Financial Officer, or (ii) any independent firm of certified public
accountants, or investment banking firm, in either case of recognized national
standing, which the Company selects at its own expense, setting forth in
reasonable detail the events requiring the adjustment and the method by which
such adjustment was calculated, shall be mailed to the Holder and shall specify
the adjusted Applicable Warrant Price and/or the number of shares of Common
Stock purchasable upon exercise of the Warrant after giving effect to the
adjustment.
4.11 No Impairment. The Company shall not, by amendment of its charter or
bylaws or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issuance or sale of securities or any other
voluntary action, seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but shall at all
times in good faith assist in the carrying out of all the provisions of this
Article IV.
4.12 Determination Final. Subject to Section 4.6(e), any determination
that the Company or the Board of Directors of the Company shall make pursuant to
this Article IV shall be final, binding and conclusive.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the Effective Date, the Company hereby represents that:
5.1 Organization. It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as it is now being
conducted and to execute,
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deliver and perform this Warrant and to consummate the transaction contemplated
hereby;
5.2 Title. The assets of the Company's Healthcare Communications Business
(the "Assets") are as set forth on Schedule I. The Assets (i) are subject to any
and all liabilities relating to such Assets; (ii) constitute substantially all
the properties and assets forming a part of, used, held, or intended to be
useful in, the conduct of the Healthcare Communications Business, except, in
each case, as would not reasonably be expected to materially and adversely
affect the Healthcare Communications Business; (iii) represent all of the
properties and amounts formerly held by Parent or Avicenna Systems Corporation
("Avicenna") and useful in connection with the Healthcare Communications
Business; and (iv) have been validly transferred and conveyed by Parent and
Avicenna to the Company such that the Company has all rights in respect of such
properties and assets that were formerly held by Parent and Avicenna (except
that certain software licenses may contain restrictions on assignment).
5.3 Conduct of Business. The Company will conduct the activities of the
Healthcare Communications Business through the Company or a wholly-owned
subsidiary of the Company.
5.4 Capitalization. The Company's authorized capital stock consists of:
10,000,000 shares of Common Stock, of which 1,000,000 shares are issued and
outstanding.
5.5 Options. Except pursuant to this Warrant there are no Options,
warrants or similar rights to acquire from the Company, or agreements or other
obligations by the Company, absolute or contingent, to issue or sell Common
Stock, whether on conversion or exchange of Convertible Securities or otherwise;
5.6 Preemptive Rights. No shareholder of the Company has any
preemptive rights to subscribe for shares of Common Stock;
5.7 Authority. The Company has the right and power, and is duly authorized
and empowered, to enter into, execute, deliver and perform its obligations under
this Warrant;
5.8 Binding Effect. This Warrant has been duly authorized, executed and
delivered and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and (b) general
principles of equity.
5.9 No Conflict. The execution, delivery and/or performance by the Company
of this Warrant shall not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any applicable law or a breach of any
provision contained in the
17
Company's charter or bylaws or contained in any agreement, instrument or
document to which the Company is a party or by which it is bound.
5.10 Consents. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body is
required for the valid issuance of the Warrant or for the performance of any of
the Company's obligations hereunder, except as may be required by federal or
state securities laws.
ARTICLE VI
COVENANTS
The Company covenants that from and after the Effective Date, the Company
shall at all times reserve and keep available for issue upon the exercise of
this Warrant such number of its authorized and unissued shares of Common Stock
as will be sufficient to permit such exercise in full. All shares of Common
Stock which shall be so issuable, when issued upon exercise of this Warrant and
payment therefor in accordance with the terms of this Warrant, shall be duly and
validly issued and fully paid and nonassessable, and not subject to preemptive
rights.
ARTICLE VII
DEMAND AND INCIDENTAL REGISTRATION OF REGISTRABLE
SHARES
7.1 Registration. Neither this Warrant nor the Registrable Shares has been
registered under the Securities Act or applicable state securities laws. The
Holder, by acceptance hereof, represents that it is acquiring the Warrants to be
issued to it for its own account and not with a view to the distribution
thereof, and agrees not to sell, transfer, pledge or hypothecate any Warrants or
any Registrable Shares unless a registration statement is effective for such
Warrants or Registrable Shares under the Securities Act or in the opinion of
such Holder's counsel, which counsel must be acceptable to the Company (a copy
of which opinion shall be delivered to the Company) such transaction is exempt
from the registration requirements of the Securities Act and applicable state
securities laws.
7.2 Demand Registration. At any time after (i) the date that is two (2)
years after the Effective Date, unless prior thereto Parent has registered under
the Securities Act any of the Company's Common Stock held, directly or
indirectly, by Parent for sale to the public pursuant to an underwritten public
offering or continuous offering stock program; and (ii) the expiration of any
"lock-up period" during which the Company, in connection with an Initial Public
Offering, agrees with an underwriter not to sell Additional Shares of Common
Stock, then holders of not less than fifty percent (50%) of the then total
number of Registrable Shares, as to which Warrants have been exercised or are
then exercisable, may make a written request for registration under the
Securities Act of all or part of their Registrable Shares (the "Demand
Registration") for the public disposition of such Registrable Shares. The
Company shall, as soon as reasonably
18
practicable after receipt of such written request, notify all other holders of
Registrable Shares, as to which Warrants have been been exercised or are then
exercisable, of the Company's receipt of such written request, and offer such
holders the opportunity to include their Registrable Shares, as to which
Warrants have been exercised or are then exercisable, in such Demand
Registration. The Company shall then use reasonable best efforts to register
under the Securities Act the Registrable Shares proposed to be sold by such
holders and to keep such Demand Registration open for ninety (90) days;
provided, however, that the Company shall not be obligated (i) to effect the
Demand Registration unless it has previously consummated an Initial Public
Offering, (ii) to effect the Demand Registration covering less than fifty
percent (50%) of the then total number of Registrable Shares, or (iii) to effect
more than one (1) Demand Registration under this Section 7.2; provided that if
the Registrable Shares proposed to be sold by such holders were not sold
pursuant to the Demand Registration, other than because such holders elected not
to sell their Registrable Shares, the holders of any number of Registrable
Shares shall be entitled to make a written request for additional Demand
Registrations in accordance with the procedures of this Section 7.2 until such
Registrable Shares initially proposed to be sold by such holders have been sold
(except that a request for an additional Demand Registration may not be made
until six (6) months after the effective date of the Registration Statement
effected in response to any previous Demand Registration); and provided,
further, that the Demand Registration shall be subject to the provisions of
Section 7.4 hereof. A request for the Demand Registration will specify the
number of Registrable Shares proposed to be sold. A registration will not count
as the Demand Registration until the registration statement relating thereto has
become effective and been kept open for not less than 90 days.
7.3 Incidental Registration. (a) If the Company proposes to register under
the Securities Act any Common Stock for sale to the public pursuant to a firm
commitment underwriting (other than in connection with an Initial Public
Offering in which Parent is not selling any of the Company's Common Stock held,
directly or indirectly, by Parent), the Company will give written notice at such
time to all holders of Registrable Shares, as to which Warrants have been been
exercised or are then exercisable, of its intention to do so. Upon the written
request of any such holder, given within thirty (30) days after receipt of any
such notice by the Company, to register any of its Registrable Shares, the
Company will use its reasonable best efforts to cause the Registrable Shares as
to which registration shall have been so requested, to be included in the
securities to be covered by such registration statement (the "Incidental
Registration"), all to the extent requisite to permit the sale or other
disposition by the holder (in accordance with its written request) of such
Registrable Shares so registered; provided, however, that nothing herein shall
prevent the Company from abandoning or delaying any such registration at any
time; and provided, further, that the Incidental Registration shall be subject
to the provisions of Sections 7.3(b) and 7.3(c), and Section 7.4 to the extent
indicated therein. Any request by a holder pursuant to this Section 7.3 to
register Registrable Shares shall specify the number of Registrable Shares to be
included in the underwriting and that such Registrable Shares are to be included
in the underwriting on the same terms and conditions as the shares of Common
Stock otherwise being sold through underwriters under such
19
registration. If the managing underwriter or underwriters shall advise the
Company in writing that, in the view of such underwriters, such holders of
Registrable Shares shall have requested the registration of a number of
Registrable Shares that exceeds the maximum number of Shares that can be sold
without having a material adverse effect on the marketing of the Common Stock to
be sold under such registration statement, including the price at which such
Common Stock can be sold (an "Adverse Market Effect"), the Company shall not be
required to register Shares in excess of such maximum number, subject to the
provisions of Section 7.3(b) (a "Cut-Back Event").
(b) In the event of a Cut-Back Event arising in connection with an
Incidental Registration, the following provisions shall apply:
(i) if the registration of Common Stock giving rise to the
Incidental Registration is initiated by the Company, then the Company shall
include in such registration (A) first, all of the Common Stock which the
Company proposes to sell, and (B) second, the number of shares of Common Stock
validly requested by Selling Shareholders and holders of Registrable Shares to
be included in such registration that, in the opinion of the underwriters, can
be sold without having an Adverse Market Effect, such amount to be allocated
among all such Selling Shareholders and holders of Registrable Shares pro rata
on the basis of the respective number of shares of Common Stock each such
Selling Shareholder and holder of Registrable Shares has requested to be
included in such registration;
(ii) if a registration of Common Stock giving rise to an
Incidental Registration is initiated by any Selling Shareholder(s) (other than
the Parent), then there shall be included in such registration (A) if the
Company is not selling Common Stock in the registration, (I) first, all of the
Common Stock proposed to be sold by such Selling Shareholder(s) initiating such
registration, and (II) second, the number of shares of Common Stock of the
Company validly requested by all other Selling Shareholders and holders of
Registrable Shares to be included in such registration that, in the opinion of
the underwriters, can be sold without having an Adverse Market Effect, such
amount to be allocated among all such other Selling Shareholders and holders of
Registrable Shares pro rata on the basis of the respective number of shares of
Common Stock each such other Selling Shareholder and holder of Registrable
Shares has requested to be included in such registration; and (B) if the Company
is selling Common Stock in the registration (other than solely in connection
with the covering of an over-allotment option), (I) first, all of the Common
Stock proposed to be sold by the Company and such Selling Shareholder(s)
initiating such registration, and (II) second, the number of shares of Common
Stock of the Company validly requested by all other Selling Shareholders and
holders of Registrable Shares to be included in such registration that, in the
opinion of the underwriters, can be sold without having an Adverse Market
Effect, such amount to be allocated among all such other Selling Shareholders
and holders of Registrable Shares pro rata on the basis of the respective number
of shares of Common Stock each such other Selling Shareholder and holder of
Registrable Shares has requested to be included in such registration;
20
(iii) if a registration of Common Stock giving rise to an
Incidental Registration is initiated by the Parent, then there shall be included
in such registration (A) if the Company is not selling Common Stock in the
registration, the number of shares of Common Stock of the Company validly
requested by the Parent and all holders of Registrable Shares to be included in
such registration that, in the opinion of the underwriters, can be sold without
having an Adverse Market Effect, such amount to be allocated among the Parent
and all such holders of Registrable Shares pro rata on the basis of the
respective number of shares of Common Stock the Parent and each holder of
Registrable Shares has requested to be included in such registration; and (B) if
the Company is selling Common Stock in the registration (other than solely in
connection with the covering of an over-allotment option), (I) first, all of the
Common Stock proposed to be sold by the Company in the registration, and (II)
second, the number of shares of Common Stock of the Company validly requested by
the Parent and all holders of Registrable Shares to be included in such
registration that, in the opinion of the underwriters, can be sold without
having an Adverse Market Effect, such amount to be allocated among the Parent
and the holders of Registrable Shares pro rata on the basis of the respective
number of shares of Common Stock the Parent and each holder of Registrable
Shares has requested to be included in such registration.
(c) Notwithstanding any other provision of this Warrant, it is
further agreed that, if any Selling Shareholder (other than the Parent) validly
exercises a right to request registration under the Securities Act of all or
part of its Common Stock, and, under the terms of any written agreement between
the Company and such Selling Shareholder with respect to such registration, no
Person is permitted to request an Incidental Registration in connection
therewith, and no other Selling Shareholder, Parent or the Company is permitted
to participate in such registration, then such prohibition shall also be binding
upon the holders of Registrable Shares; it being agreed however, that the
Company shall not grant such right of exclusivity more than one time to any
Selling Shareholder.
7.4 Discretion. Notwithstanding any other provision hereof to the
contrary,
(a) the Company shall be entitled, in its reasonable discretion, to
elect, once with respect to each Demand Registration which it may be requested
to effect hereunder, to delay the filing of a registration statement pursuant to
Section 7.2 for up to one hundred and twenty (120) days from the date of the
request therefor under Section 7.2 (or for such shorter period if the Company
files a registration statement under the Securities Act for the sale of Common
Stock to the public pursuant to an underwritten public offering or continuous
offering stock program), so long as the Board of Directors of the Company shall
have determined in good faith prior to effecting such delay that such delay
would be in the best interests of the Company,
(b) the Company shall have the right to select the managing
underwriter or underwriters for any offer or sale of the Registrable Shares to
which the
21
Demand Registration or Incidental Registration relates; provided, however, that
in the case of a Demand Registration, the holders of a majority of the
Registrable Shares participating in the Demand Registration shall have the right
to approve such underwriters, such approval not to be unreasonably withheld or
delayed,
(c) in the event of a Cut-Back Event arising in connection with a
Demand Registration, the Company shall not be required to register Registrable
Shares in excess of the maximum number which can be sold without an Adverse
Market Effect; provided, however, that holders of Registrable Shares shall have
priority over any and all Selling Shareholders (including, but not limited to,
Parent and the Company) in determining whose shares of Common Stock shall be
included in the Registration,
(d) in connection with a Demand Registration, the holders of
Registrable Shares shall consult with the Company with respect to the method of
sale of such Registrable Shares; and in any event, such holders shall use their
best efforts to the effect that the sale of such Shares shall not have a
material adverse effect on the market price of the Common Stock,
(e) the Company shall pay all out-of-pocket expenses incident to the
Company's effectuation of a Demand Registration or an Incidental Registration,
including without limitation, all registration and filing fees (including filing
fees with respect to the National Association of Securities Dealers, Inc.), all
fees and expenses of complying with state securities or "blue sky" laws, all
printing expenses, all listing fees, all registrars' and transfer agents' fees,
the fees and disbursements of counsel for the Company and of its independent
certified public accountants, including the expenses of any special audits
and/or "comfort" letters required by or incident to such performance and
compliance; but excluding the fees and disbursements of counsel to the sellers
of the Registrable Shares, underwriting discounts and commissions, and
applicable transfer taxes, if any, which shall be borne by the sellers of the
Registrable Shares being registered in all cases, and
(f) such holders agree to cooperate fully to facilitate the Demand
Registration and the Incidental Registration, and offer and sale of Registrable
Shares covered thereby, including completing selling shareholder questionnaires,
entering into customary underwriting and other agreements, and furnishing
information for inclusion in any prospectus.
ARTICLE VIII
REGISTRATION PROCEDURES
If the Company is required by the provisions hereof to use commercially
reasonable efforts to effect the registration of any Registrable Shares under
the Securities Act, the Company will:
22
(a) furnish to each seller of Registrable Shares and to any
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the intended disposition
of the Registrable Shares covered by such registration statement;
(b) use commercially reasonable efforts (i) to register or qualify
the Registrable Shares covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the sellers of
Registrable Shares or, in the case of an underwritten public offering, the
managing underwriter, reasonably shall request, (ii) to prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements, and take such other actions, as may be necessary to maintain such
registration and qualification in effect at all times for the period of
distribution contemplated thereby and (iii) to take such further action as may
be necessary or advisable to enable the disposition of the Registrable Shares in
such jurisdictions, provided, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(c) use commercially reasonable efforts to list the Registrable
Shares covered by such registration statement with any securities exchange on
which the Common Stock of the Company is then listed, or, if the Common Stock is
not then listed on a national securities exchange, use its best efforts to
facilitate the reporting of the Common Stock on NASDAQ;
(d) notify each seller of Registrable Shares and each underwriter
under such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event of which the Company has knowledge as a result of which the
prospectus contained in such registration statement, as then in effect, includes
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and promptly amend or
supplement such registration statement to correct any such untrue statement or
omission;
(e) notify each seller of Registrable Shares of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose and make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible time;
(f) if the offering is an underwritten offering, enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are usual and customary
in the securities business for such an arrangement between such underwriter and
companies of the Company's size
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and investment stature, including, without limitation, customary indemnification
and contribution provisions;
(g) make available for inspection by each seller of Registrable
Shares at such seller's expense, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(h) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Shares not later than the effective date of the
registration statement; and
(i) take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any legend restricting the
sale or transfer of such securities) representing the Registrable Shares to be
sold pursuant to the registration statement and to enable such certificates to
be in such denominations and registered in such names as the investors or any
underwriters may reasonably request.
In connection with any registration hereunder, the sellers of Registrable
Shares will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
ARTICLE IX
INDEMNIFICATION AND CONTRIBUTION
9.1 Indemnification by Company. In the event of a registration of any of
the Registrable Shares under the Securities Act pursuant to the terms of this
Warrant, the Company will indemnify and hold harmless and pay and reimburse,
each seller of such Registrable Shares thereunder, each underwriter of such
Registrable Shares thereunder and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, as and when incurred,
to which such seller, underwriter or controlling person may become subject under
the Securities Act or otherwise insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Shares were registered
under the Securities Act pursuant hereto or any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation or alleged violation of the Securities
Act or any state securities or blue sky laws and will reimburse each such
seller,
24
each such underwriter and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon the Company's
reliance on an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any such
seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus.
Notwithstanding the foregoing, the indemnity provided in this Section 9.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of such
indemnified party.
9.2 Indemnification of Company. In the event of a registration of any of
the Registrable Shares under the Securities Act pursuant hereto each seller of
such Registrable Shares thereunder, severally and not jointly, will indemnify
and hold harmless the Company, each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company who signs
the registration statement, each director of the Company, each underwriter and
each person who controls any underwriter within the meaning of the Securities
Act, against all losses, claims, damages or liabilities, joint or several, as
and when incurred, to which the Company or such officer, director, underwriter
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon reliance on any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Shares were registered under the
Securities Act pursuant hereto or any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and each such officer, director,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, that such seller will be liable
hereunder in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, that the liability of each
seller hereunder shall be limited to the proceeds received by such seller from
the sale of Registrable Shares covered by such registration statement.
Notwithstanding the foregoing, the indemnity provided in this Section 9.2 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of such
indemnified party.
9.3 Notice of Action. Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a
25
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Article IX and shall only
relieve it from any liability which it may have to such indemnified party under
this Article IX if and to the extent the indemnifying party is materially
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to such indemnified party under this Article IX for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded based upon written advise of its counsel that there
may be reasonable defenses available to it which are different from or
additional to those available to the indemnifying party or if the interests of
the indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
9.4 Contribution. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
holder of Registrable Shares exercising rights under this Warrant, or any
controlling person of any holder, makes a claim for indemnification pursuant to
this Article IX but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Article IX provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any holder or any such
controlling person in circumstances for which indemnification is provided under
this Article IX; then, and in each such case, the Company and holder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that
holder is responsible for the portion represented by the percentage that the
public offering price of its Registrable Shares offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, that, in any such case, (a) no holder will be required to
contribute any amount in excess of the public offering price of all such
Registrable Shares offered by it pursuant to such registration statement and (b)
no person or entity guilty of fraudulent misrepresentation
26
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
ARTICLE X
LOSS OR MUTILATION
Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to the Company of the ownership of and the loss, theft, destruction
or mutilation of this Warrant and indemnity reasonably satisfactory to the
Company and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
the Holder; provided, however, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
ARTICLE XI
NO STOCK RIGHTS
No Holder of this Warrant, as such, shall be entitled to vote or be deemed
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise hereof, nor shall anything contained herein
be construed to confer upon the Holder of this Warrant, as such, the rights of a
stockholder of the Company or the right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, to exercise any preemptive right, to
receive notice of meetings or other actions affecting stockholders (except as
provided herein), or to receive dividends or subscription rights or otherwise
(except as provided herein), until the exercise of Warrants shall have occurred.
ARTICLE XII
MISCELLANEOUS
12.1 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted the
Company or by creditors of the Company.
12.2 Nonwaiver; Cumulative Remedies. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder or the Company
shall operate as a waiver of such right or otherwise prejudice the rights,
powers or remedies of the Holder or the Company. No single or partial waiver by
the Holder or the Company of any provision of this Warrant or of any breach or
default hereunder or of any right or remedy shall operate as a waiver of any
other provision, breach, default right or remedy or of the same provision,
breach, default right or remedy on a future occasion. The rights and remedies
provided in this Warrant are cumulative and are in addition to all rights and
27
remedies which the Holder or the Company may have in law or in equity or by
statute or otherwise.
12.3 Modification; Severability
(a) If, in any action before any court or agency legally empowered
to enforce any term, any term is found to be unenforceable, then such term shall
be deemed modified to the extent necessary to make it enforceable by such court
or agency.
(b) If any term is not curable as set forth in Section 12.3(a), the
unenforceability of such term shall not affect the other provisions of this
Warrant but this Warrant shall be construed as if such unenforceable term had
never been contained herein.
12.4 Integration. This Warrant replaces all prior and contemporaneous
agreements and supersedes all prior and contemporaneous negotiations between the
parties with respect to the transactions contemplated herein and constitutes the
entire agreement of the parties with respect to the transactions contemplated
herein.
12.5 Amendment. This Warrant may not be modified or amended except by
written agreement of the Company and the Holder.
12.6 Headings. The headings of the Sections of this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
12.7 Meanings. Whenever used in this Warrant, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all genders; and the
words "herein," "hereof" and "hereunder" and words of similar import shall refer
to this instrument as a whole, including any amendments hereto.
12.8 Notice Generally. All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be deemed validly
given, made or served if in writing and delivered personally (as of such
delivery) or sent by certified mail, return receipt requested, postage prepaid,
(as of the date of receipt as noted on the delivery receipts), addressed, if to
the Holder, to the Holder at its last known address appearing on the Register,
and if to the Company, to the Company at c/o Synetic, Inc., 000 Xxxxx Xxxxx,
Xxxxxx 0, Xxxxxxx Xxxx, Xxx Xxxxxx 00000, Attention: Chief Financial Officer, or
at such other address as shall be furnished in writing by the parties as herein
provided.
12.9 Successors and Assigns. Subject to the provisions of Article 3, this
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors and assigns of the Company and the Holder.
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12.10 Survival of Rights and Duties. This Warrant shall terminate and be
of no further force and effect on the earlier of 5:00 P.M., New York City time,
on the last day of the Exercise Period or the date on which all of the Warrants
have been exercised, except that the provisions of Article II, Articles VII,
VIII and IX (if this Warrant was exercised), and Article XII shall continue in
full force and effect after such termination date.
12.11 Governing Law. In all respects, including all matters of
construction, validity and performance, this Warrant and the obligations arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of New York applicable to contracts made and performed in
such state, without regard to the principles thereof regarding conflict of laws,
and any applicable laws of the United States of America.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: As of January 1, 1999
SYNETIC HEALTHCARE COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
Attest:
----------------------------
Name:
Title:
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