Exhibit 10.4
THIS WARRANT HAS BEEN ACQUIRED BY THE HOLDER SOLELY FOR ITS OWN ACCOUNT FOR THE
PURPOSE OF INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND APPLICABLE STATE SECURITIES LAWS. THIS WARRANT HAS NOT BEEN
REGISTERED UNDER THE ACT OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION THEREFROM.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
HEARTGEN CENTERS, INC.
Void At and After the Expiration Date
(As Defined in Section 1.4 Hereof)
This certifies that, for value received, Vasomedical, Inc. ("Vasomedical"),
the registered holder hereof or registered assigns (the "Holder"), is entitled
to purchase, subject to the terms and conditions contained in this Warrant, from
HeartGen Centers, Inc., an Indiana corporation (the "Company"), at any time and
from time to time, in whole or in part, on or after the date of this Warrant and
prior to the Expiration Date (as defined in Section 1.2 hereof), an aggregate of
52,620 fully paid and nonassessable shares of Common Stock, without par value,
of the Company (the "Common Stock"), at an exercise price of $2.20 per share
(the "Warrant Price"). The number of shares of Common Stock purchasable upon the
exercise of this Warrant and the Warrant Price per share are subject to
adjustment from time to time as hereinafter set forth.
Section 1. Exercise of Warrant; Expiration Date.
1.1. Exercise of Warrant. Subject to the terms and conditions contained in
this Warrant, the Holder hereof shall have the right, at any time and from time
to time, in whole or in part, on or after the date of this Warrant and prior to
the Expiration Date, to purchase from the Company that number of fully paid and
nonassessable shares of Common Stock to which the Holder hereof may at the time
and from time to time, in whole or in part, be entitled to purchase pursuant to
this Warrant (the "Shares"), upon surrender of this Warrant to the Company at
its Principal Office (as defined in Section 5 hereof), together with the
Purchase Form annexed hereto duly completed and signed by the Holder or by its
authorized or attorney, and upon payment to the Company of the aggregate Warrant
Price (as adjusted, if adjusted, pursuant to Section 7 hereof) for the number of
Shares in respect of which this Warrant is then exercised. Payment of the
Warrant Price shall be made in the form of a certified or official bank check
payable to the order of the Company.
The rights of purchase represented by this Warrant shall be exercisable, at
the election of the Holder, either in whole or from time to time in part and, in
the event that this Warrant is exercised in respect of less than all of the
Shares purchasable upon exercise of this Warrant at any time prior to the
Expiration Date, a new Warrant of like tenor and representing the right to
purchase the remaining Shares purchasable upon exercise of this Warrant shall be
issued to the Holder.
1.2. Issuance of Shares. Subject to Section 3 hereof, upon surrender of
this Warrant and payment of the Warrant Price as aforesaid, the Company shall
issue and cause to be delivered with all reasonable dispatch to and in the name
of the Holder hereof a certificate or certificates for the number of full Shares
so purchased upon the exercise of this Warrant, together with cash, as
hereinafter provided, in respect of any fractional Shares otherwise issuable
upon such surrender. Such certificate or certificates shall be deemed to have
been issued, and the Holder shall be deemed to have become the holder of record
of such Shares, as of the close of business on the date of surrender of this
Warrant and payment of such Warrant Price, as aforesaid; provided, however, that
if, at the date of surrender of this Warrant and payment of such Warrant Price,
the transfer books for the Common Stock or other securities purchasable upon the
exercise of this Warrant shall be closed, the certificate or certificates for
the Shares in respect of which this Warrant is then exercised shall be issuable
as of the opening of business on the date on which such books shall next be
opened, and until such date the Company shall be under no duty to deliver any
certificate for such Shares.
1.3. No Fractional Shares. The Company shall not be required to issue
fractional Shares upon the exercise of this Warrant. If any fraction of a Share
would, except for the provisions of this Section 1.3, be issuable upon the
exercise of this Warrant (or specified portion thereof), the Company shall pay
to the Holder an amount in cash equal to the Fair Market Value for one share of
Common Stock (as determined pursuant to Section 7.1(i) hereof), multiplied by
such fraction.
1.4. Expiration Date. This Warrant and the rights of purchase represented
hereby and the other rights of the Holder hereunder shall terminate and be void
and of no further force and effect upon the date and time (the "Expiration
Date") that is the earlier of (a) 5:00 P.M., Scottsdale, Arizona time, on
January 1, 2007, (b) 5:00 P.M. Scottsdale, Arizona time on the thirtieth (30th)
day following the date that the Company gives notice to the Holder that the
Holder is in default of its obligations under the Credit Agreement, dated as of
the date hereof between the Holder and the Company, unless the Holder cures such
default within such thirty (30) day period, or (c) the date on which the Holder
delivers notice to the Company of the Holder's exercise of the repurchase option
set forth in Section 8 hereof.
1.5 Representations of Company. The Company represents and warrants that
the authorized capital consists of 20,000,000 shares of Common Stock of which
7,187,937 shares are issued and outstanding. The Company has no options,
warrants or convertible securities outstanding, and no person has any right to
acquire any shares of the Company's capital stock except as follows:
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(a) The holders of Qualified Debt (as defined in Section 7.2) have the
right, subject to certain conditions, to acquire up to 818,182 shares of Common
Stock.
(b) The Company has issued options to its employees to acquire 1,288,700
shares of Common Stock pursuant to its 2000 Stock Option and Incentive Plan. The
Company has issued to an executive officer of the Company an option to purchase
578,560 shares of Common Stock.
(c) Two (2) of the Company's executive officers have the right to purchase
an aggregate of 54,545 shares of Common Stock ("Qualified Shares") at a price of
$2.20 per share as payment of their right to deferred compensation in the
aggregate amount of $120,000. The officers' right to purchase Qualified Shares
may subsequently be evidenced by a Warrant. Those officers will also receive
Warrants to purchase an additional 54,545 shares of Common Stock at a price of
$2.20 per share. The shares of Common Stock to be issued pursuant to the rights
and warrant described in this Section 1.5(c) are referred to as "Qualified
Shares."
(d) The Company has issued warrants which entitle the holders to purchase
up to 657,791 shares of Common Stock at a price of $2.20 per share.
The foregoing options, warrants and rights to acquire shares of Common Stock are
subject to standard provisions for adjustment in the event of transactions
similar to those described in Section 7.1 of this Warrant.
Section 2. Transfer or Exchange of Warrant.
2.1. Transfer. This Warrant shall be transferable only with the prior
written consent of the Company, which consent shall not be unreasonably
withheld, and then, subject to Section 3 hereof, shall be transferable only upon
surrender of this Warrant to the Company at its Principal Office, together with
the Assignment Form annexed hereto duly completed and signed by the Holder or by
its authorized attorney. In case of transfer by an attorney, the original power
of attorney, duly approved, or an official copy thereof, duly certified, shall
be delivered to the Company. Upon any registration of transfer, the Company
shall execute and deliver to the person entitled thereto a new Warrant of like
tenor and representing the right to purchase the same number of Shares as this
Warrant then entitles the Holder hereof to purchase.
2.2. Exchange. This Warrant may, with the prior written consent of the
Company, be exchanged for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase the same number of Shares as this Warrant then entitles the Holder
hereof to purchase. Any request to exchange this Warrant shall be made by the
Holder in writing delivered to the Company at its Principal Office. Thereafter,
upon consent of the Company and surrender of this Warrant, the Company shall
execute and deliver to the Holder a new Warrant or Warrants, as the case may be,
as so requested. The term "Warrant" as used herein includes any Warrant or
Warrants into which this Warrant may be divided or exchanged as aforesaid.
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Section 3. Payment of Taxes. The Company shall pay or cause to be paid all
documentary stamp taxes, if any, attributable to the initial issuance of this
Warrant and Shares issuable upon the exercise of this Warrant; provided,
however, that the Company shall not be required to pay, and the Holder shall
pay, any tax or taxes that may be payable in respect of any transfer involved in
the issue or delivery of any Warrant or certificates for Shares in a name other
than that of the Holder of this Warrant.
Section 4. Mutilated or Missing Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification or bond, and (in the case of mutilation)
upon surrender of this Warrant, and upon cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant of like tenor and
representing the right to purchase the same number of Shares as this Warrant
then entitles the Holder hereof to purchase. In connection with any application
for such substitute Warrant, the Holder hereof shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company may
prescribe.
Section 5. Principal Office; Warrant Register. The principal office of the
Company (the "Principal Office") at the date of this Warrant is located at 00000
Xxxxx Xxxxxx Xxxx., Xxxxx 0, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Chief
Executive Officer. The Company may from time to time change its Principal Office
by notice in writing to the Holder.
The Company shall maintain at its Principal Office a register (the "Warrant
Register") for registration of Warrants and transfers and exchanges of Warrants.
The Company shall be entitled to treat the registered Holder of this Warrant as
the owner in fact hereof for all purposes and shall not be bound to recognize
any equitable or other claim to or interest in this Warrant on the part of any
other person. The Company shall cancel any Warrant surrendered for exchange,
substitution, transfer or exercise in whole or in part.
Section 6. Reservation of Shares. There have been reserved, and the Company
shall at all times until the Expiration Date keep reserved, out of its
authorized Common Stock, a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by this Warrant.
The Company covenants that all Shares which may be issued upon the exercise of
this Warrant shall, upon issue, be duly authorized, validly issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issue thereof.
Section 7. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the Warrant
Price per share shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
7.1. Adjustments. The number of Shares purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment as follows:
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(a) In case the Company shall at any time after the date of this Warrant
(i) pay a dividend or make any other distribution to all holders of its
outstanding shares of Common Stock in shares of Common Stock such that the
number of shares of Common Stock outstanding is increased, (ii) subdivide or
split-up its outstanding shares of Common Stock into a greater number of shares
of Common Stock, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company, then the number of
Shares purchasable upon exercise of this Warrant and any Additional Warrant
immediately prior thereto shall be adjusted so that the Holder hereof shall be
entitled to purchase the kind and number of Shares or other securities of the
Company that he would have owned or would have been entitled to receive after
the happening of any of the events described above had this Warrant and the
Additional Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant to
this Section 7.1(a) shall become effective immediately after the effective date
of such event, retroactive to the record date, if any, for such event.
(b) In case the Company shall at any time after the date of this Warrant
issue to any person any additional shares of Common Stock or securities
convertible into shares of Common Stock (including warrants and options) (the
"Additional Securities"), entitling them to subscribe to or purchase shares of
Common stock (or securities convertible into shares of Common Stock) at a price
per share (or having a conversion price per share) that on the date of the
issuance of the Additional Securities is lower than the then Warrant Price in
effect immediately prior to such issuance, then the Warrant Price shall
automatically be reduced to the issue price, purchase price or initial
conversion price per share of Common Stock, as applicable, of such Additional
Securities (the "Additional Security Price"). If the Company issues Additional
Securities after the issuance of any Additional Warrants and the Additional
Security Price is less than the Additional Warrant Price in effect immediately
prior to such issuance, then the Additional Warrant Price shall be automatically
adjusted to the Additional Security Price. Adjustments pursuant to this Section
7.1(b) shall become effective immediately after the date such Additional
Securities are issued.
(c) In case the Company shall at any time after the date of this Warrant
distribute to all holders of its outstanding shares of Common Stock evidences of
its indebtedness or assets (excluding cash dividends or distributions) or
securities (excluding (i) those dividends or distributions referred to in
Section 7.1(a) above, and (ii) those rights, options and warrants referred to in
Sections 7.1(b) above), the number of Shares thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon the exercise of this Warrant by a fraction, the
numerator of which shall be the Fair Market Value per share of Common Stock (as
determined pursuant to Section 7.1(i) below) on the date of such distribution,
and the denominator of which shall be such Fair Market Value per share of Common
Stock, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive) of the
portion of the evidences of indebtedness or assets or securities so distributed
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made, and shall become effective on the date of
distribution, retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
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(d) Whenever the number of Shares purchasable upon the exercise of this
Warrant is adjusted as herein provided the Warrant Price per share payable upon
exercise of this Warrant shall be adjusted (calculated to the nearest $.0001) by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Shares purchasable upon
the exercise of this Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Shares so purchasable upon the
exercise of the Warrant immediately after such adjustment. Each time the Warrant
Price per share is adjusted pursuant to this Section 7.1(d), a corresponding
adjustment shall be made to the Additional Warrant Price per share with respect
to each Additional Warrant that is then outstanding.
(e) Whenever the number of Shares purchasable upon the exercise of this
Warrant or an Additional Warrant or the Warrant Price or Additional Warrant
Price is adjusted as herein provided, the Company shall promptly mail to the
Holder of this Warrant notice of such adjustment or adjustments, together with a
certificate of a firm of independent public accountants selected in good faith
by the Board of Directors of the Company (who may be the regular accountants
employed by the Company) setting forth the number of Shares purchasable upon the
exercise of this Warrant and Additional Warrants and the Warrant Price per Share
and Additional Warrant Price per Share after such adjustment, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
(f) For the purpose of this Section 7.1, the term "shares of Common Stock"
shall mean (i) the class of stock designated as the Common Shares, without par
value, of the Company at the date of this Warrant or (ii) any other class of
stock resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. In the event that any time, as a result of an
adjustment made pursuant to Section 7.1(a) above, the Holder of this Warrant
shall become entitled to purchase any securities of the Company other than
shares of Common Stock, thereafter the number of such other securities so
purchasable upon exercise of this Warrant and any Additional Warrant and the
Warrant Price and Additional Warrant Price of such securities shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Shares contained in this
Section 7.
(g) If any Additional Securities are issued subsequent to the date of this
Warrant and prior to a Liquidity Event and immediately after the issuance of
such Additional Securities, the number of Shares purchasable upon the exercise
of this Warrant and the "Additional Warrants" (issued as provided in this
Section 7.1(g)) is less than two and eight- tenths percent (2.8%) of the number
of Deemed Shares (as defined below) of Common Stock, then the Holder shall be
issued an Additional Warrant that will enable the Holder to purchase a
sufficient number of shares of Common Stock so that, subject to the terms and
conditions of this Section 7.1(g), the exercise of this Warrant and the
Additional Warrants issued pursuant to this Section 7.1(g) would enable the
Holder to acquire two and eight-tenths percent (2.8%) of the number of Deemed
Shares of Common Stock as determined immediately after the issuance of the
Additional Securities. Except as otherwise expressly provided herein, the
6
provisions of any Additional Warrants issued pursuant to this Section 7.1(g)
shall be the same as the provisions of this Warrant except that the number of
shares of Common Stock initially subject to the Additional Warrants shall be
determined as provided in this Section 7.1(g). The initial Additional Warrant
Price per share of Additional Warrants (the "Additional Warrant Price") shall be
equal to the issue price, purchase price or initial conversion price per share
of Common Stock, as applicable, of the Additional Securities which resulted in
the issuance of the Additional Warrant. The number of "Deemed Shares" of Common
Stock shall be equal to the sum of (i) the number of outstanding shares of
Common Stock, and (ii) the number of shares of Common Stock that would be issued
if all options, warrants and other rights described in Section 1.5 (excluding
the Warrant and the Additional Warrants) were converted into Common Stock but
reduced by the number of shares of Common Stock for which no adjustment was
required pursuant to Sections 7.1(b) or 7.1(c) by reason of Section 7.2. For
purposes of this Section 7.1(g), the number of shares of Common Stock that could
be acquired upon the exercise of this Warrant and any Additional Warrants shall
be determined as if no portion of this Warrant or any Additional Warrants had
been previously exercised.
(h) For purposes of Section 7.1 (g), if, upon the expiration of any rights,
options, warrants or conversion privileges of any Additional Securities, any
thereof shall not have been exercised, the number of Shares of Common Stock
purchasable upon the exercise of any Additional Warrants issued with respect to
such Additional Securities shall each be readjusted and shall thereafter be such
as it would have been had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if the only shares of
Common Stock so issued were the shares of Common Stock, if any, actually issued
or sold upon the exercise of such rights, options, warrants or conversion
privileges; provided, however, that no such readjustment with respect to an
Additional Warrant shall have the effect of decreasing the number of Shares of
Common Stock purchasable upon the exercise of an Additional Warrant by an amount
in excess of the amount of the adjustment initially made in respect of the
issuance, sale or grant of such rights, options, warrants or conversion
privileges.
(i) For the purpose of any computation under Section 7.1(c), the "Fair
Market Value" per share of Common Stock at any date shall be the average of the
daily closing prices per share of Common Stock for the 30 consecutive trading
day period ending on the second trading day prior to such date. The closing
price for each day shall be the last reported sale price regular way or, in case
no such reported sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in each case on the New York Stock
Exchange, or, if the Common stock is not listed or admitted to trading on such
exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc. (the "NASD") through Nasdaq or
a similar organization if the NASD is no longer reporting such information. If,
however, at the date of any such computation the Common stock is not listed or
admitted to trading on any exchange or is not quoted by the NASD or a similar
organization, the "Fair Market Value" per share of Common Stock shall be the
fair market value of the shares of Common stock on such date, as determined in
good faith by the Board of Directors of the Company, whose determination shall
be evidenced by a duly adopted resolution of the Board of Directors and shall be
conclusive.
7
7.2. Certain Exceptions to Adjustment.
(a) Anything herein to the contrary notwithstanding, no adjustment in the
number of Shares purchasable upon the exercise of this Warrant or to the Warrant
Price need be made under Sections 7.1 (b) and (g) if the Company issues or
distributes to the Holder of this Warrant the rights, options or warrants, or
the evidences of indebtedness or assets or securities, referred to therein which
such Holder would have been entitled to receive had this Warrant been exercised
prior to the happening of such event or the record date with respect thereto. No
adjustment need be made for a change in the par value of the Shares.
(b) Anything herein to the contrary notwithstanding, the Company shall not
be required to make any adjustment to the number of shares purchasable upon the
exercise of this Warrant or any Additional Warrant or to the Warrant Price in
the case of any issuances of (i) shares of Common Stock or options to purchase
Common Stock issued for compensatory purposes to officers or directors of the
Company pursuant to a management stock option plan, incentive plan or other
compensatory arrangement approved by the Board of Directors of the Company in
good faith, or (ii) shares of Common Stock upon the exercise of any such
options; provided, however, that if the aggregate number of shares of Common
Stock issued pursuant to clauses (i) and (ii) above (excluding shares issued
upon the exercise of options outstanding on the date of this Agreement which are
described in Section 1.5(b) or 1.5(c)) shall exceed 10% of the outstanding
Common Stock of the Company (as adjusted to take account of any subdivision of
the shares of Common Stock into a greater number of shares or combination of
such shares into a smaller number of shares), then the number of shares
purchasable upon the exercise of the Warrant shall be adjusted with respect to
the number of shares so issued in excess of such 10% limit as provided in
Sections 7.1(b) or (g), as applicable.
(c) Anything herein to the contrary notwithstanding, the Company shall not
be required to make any adjustment to the number of Shares purchasable upon the
exercise of this Warrant or to the Warrant Price as a result of Shares of Common
Stock issued upon the exercise of options or other securities granted by the
Company prior to the date of this Warrant.
(d) Anything herein to the contrary notwithstanding, the Company shall not
be required to make any adjustment in the case of any issuance of shares of
Common Stock in exchange for Qualified Debt plus accrued interest thereon
regardless of whether such exchange is pursuant to any current conversion rights
of the holders of Qualified Debt, provided the issuance price for such shares of
Common Stock is not less than $1.10 per share (subject to adjustment upon the
occurrence of any event described in Section 7.1(a) of this Warrant). Qualified
Debt means convertible debt of the Corporation in the principal amount of
$900,000 which is outstanding on the date of this Warrant.
(e) Anything herein to the contrary notwithstanding, the Company shall not
be required to make any adjustment in the case of the issuance of any Qualified
Shares (as defined in Section 1.5(c)).
8 (f) Except as provided in Section 7.1, no adjustment in respect of any
dividends shall be made during the term of this Warrant or upon the exercise of
this Warrant.
7.3. Preservation of Purchase Rights Upon Merger, Consolidation, etc. In
case of any consolidation of the Company with or merger of the Company into
another person, or in case of any merger of another person into the Company
(other than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company),
or in case of any sale or transfer to another person of all or substantially all
of the assets of the Company, the Holder of this Warrant shall have the right
thereafter, upon payment of the Warrant Price in effect immediately prior to
such action, to purchase upon exercise of this Warrant only the kind and amount
of cash, securities and other property receivable upon such consolidation,
merger, sale or transfer by a holder of the number of Shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer, assuming such holder of Common Stock
had failed to exercise its rights of election, if any, as to the kind or amount
of cash, securities or other property receivable upon such consolidation,
merger, sale or transfer. The provisions of this Section 7.3 shall similarly
apply to successive consolidations, mergers, sales or transfers.
Section 8. Repurchase of Warrant.
8.1. Repurchase At the Option of the Holder. For a period of 30 days after
the earlier of (a) December 1, 2006 or (b) the later of (i) a Liquidity Event
Notice or (ii) the occurrence of a Liquidity Event (as defined below), the
Holder may, at its option and upon notice as provided below, require the Company
to purchase this Warrant at a purchase price equal to the "Warrant Value." The
Warrant Value shall be determined as follows:
(a) If a Liquidity Event occurs prior to December 1, 2006, then the Warrant
Value shall be equal to the greater of (i) (x) the IPO Value or the Sale Value,
as applicable, minus (y) the Warrant Price multiplied by the aggregate number of
Shares purchasable upon exercise of this Warrant at the time of the Liquidity
Event; or (ii) $249,945 as adjusted to reflect any prior exercises of the rights
granted hereunder.
(b) If no Liquidity Event has occurred prior to December 1, 2006, then the
Warrant Value shall be equal to $249,945 as adjusted to reflect any prior
exercises of the rights granted hereunder. (By way of illustration, if, as of
December 1, 2006, no Liquidity Event has occurred and the Holder has exercised
its right to purchase half of the Shares purchasable under this Warrant, then
the Warrant Value would be $124,972.50.)
The Company's obligations pursuant to this Section 8.1 will be secured by a
security interest in $249,945 of accounts receivable of the Company, and the
proceeds thereof, which security interest shall be granted pursuant to a
Security Agreement in the form attached hereto as Exhibit A. Such security
interest shall be junior and subordinate to the security interest granted under
the Security Agreement of even date, executed by the Company, which secures all
of the "Obligations" of the Company, as that term is defined in the Credit
Agreement, of even date, between Company and the Holder.
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Upon the occurrence of a Liquidity Event or the execution of a definitive
agreement pursuant to which a Liquidity Event would occur, the Company shall
provide the Holder with notice (the "Liquidity Event Notice") which shall
describe in reasonable detail the terms and conditions of such Liquidity Event,
including an estimate of the fair market value of the consideration to be
received by the Company or its shareholders pursuant to such Liquidity Event.
The Company shall provide such additional information as the Holder may
reasonably request subject to the Holder executing such Confidentiality
Agreement as the Company may reasonably request. The Company may delay giving
notice of the execution of a definitive agreement if the terms of such agreement
require that the Company delay such notice.
8.2. Certain Definitions. For purposes of this Warrant, the following terms
have the following meanings:
"Liquidity Event" means the first to occur of (a) the liquidation or
dissolution of the Company, (b) the sale or other disposition of all or
substantially all of the assets of the Company, (c) the merger or consolidation
of the Company with or into one or more other persons as a result of which the
persons holding a majority of the Company's Common Stock cease to own a majority
of the common equity of the surviving entity, (d) the closing of the initial
public offering by the Company of its equity securities (an "IPO"), (e) any of
the Company's securities become registered under the Securities and Exchange Act
of 1934 or (f) any other sale or disposition of all or any majority interest in
the business of the Company to any person or persons in any transaction or
series of related transactions, whether by merger, consolidation, sale of
assets, sale of capital stock (whether by the Company or any shareholder of the
Company) or otherwise.
"IPO Value" shall be applicable only if the Liquidity Event is an IPO, and
shall mean the result of multiplying (a) the aggregate number of Shares
purchasable upon exercise of this Warrant, times (b) the closing price per share
of Common Stock on the closing date of the IPO. The closing price for such day
shall be the last reported sale price regular way on the New York Stock
Exchange, or, if the Common stock is not listed or admitted to trading on such
exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the average of the
highest reported bid and lowest reported asked prices on the Nasdaq Stock Market
as furnished by the National Association of Securities Dealers, Inc.
"Sale Value" means the result of multiplying (a) the aggregate number of
Shares purchasable upon exercise of this Warrant, times (b) a fraction, the
numerator of which shall be the aggregate amount of cash, and the aggregate fair
market value of all securities or other property receivable by holders of the
Company's Common Stock in respect of any Liquidity Event (other than an IPO),
and the denominator of which shall be the total number of shares of the Common
Stock with respect to which consideration was received directly or indirectly as
a result of the Liquidity Event. For this purpose, the fair market value of any
non-cash property receivable in respect of any such Liquidity Event shall be
determined reasonably and in good faith by the Board of Directors of the
Company. If the Liquidity Event does not result in the receipt of cash or other
property by the Holders of the Company's Common Stock then for purposes of
computing the Sale Value, the amount of property receivable by the holders of
the Company's Common Stock shall be the amount, as determined in good faith by
the Board of Directors, that such holders would have received if the Company
were dissolved following the Liquidity Event.
10
8.3. Exercise Notice; Closing. The Holder may exercise its repurchase
option hereunder within 30 days after the first to occur of (a) December 1, 2006
or (b) a Liquidity Event, by delivering written notice of such exercise to the
Company within such 30-day period. Within ten (10) days after the Company's
receipt of such notice of exercise, the Company shall deliver to the Holder
written notice of the date fixed for such repurchase (which shall be not later
than 30 days after the date of the Company's notice) and setting forth the
Company's calculation of the repurchase price hereunder in reasonable detail.
The closing of the purchase and sale of this Warrant shall take place at the
Company's Principal Office on the date set forth in such notice. At such
closing, the Company shall deliver the purchase price to the Holder in cash by
wire transfer of immediately available funds in such amount to an account
designated by the Holder prior to such closing date, against surrender of this
Warrant to the Company.
8.4. Resolution of Disputed Calculations. In the event the Holder shall
disagree with the Company's calculation of any amount provided for in this
Section 8, the Holder shall promptly (and in any event within 30 days after
delivery of the notice of exercise referred to in Section 8.3) notify the
Company in writing, and the parties will in the first instance cooperate with
each other and use all reasonable efforts to resolve such dispute between
themselves within 15 days thereafter. If the parties are unable to resolve their
dispute within such 15-day period, they will jointly select and appoint an
independent third-party evaluator (which may be a firm of independent
accountants, investment bankers or other persons mutually acceptable to the
Holder and the Company) to resolve such dispute in its professional judgment.
The parties will promptly provide all relevant information to, and otherwise
cooperate with, the evaluator toward resolving such dispute within 30 days
thereafter. The determinations of the evaluator will be conclusive and binding
on the Holder and the Company, and they will share all expenses of the evaluator
equally. The closing of the sale and purchase of the Warrant provided for in
Section 8.3 will be delayed pending the resolution of any such dispute.
8.5. Violations. Notwithstanding anything in this Warrant to the contrary,
the Company shall not be obligated to purchase the Warrant hereunder to the
extent that such purchase would result in a breach or violation of, or a default
under, any law, rule or regulation or any order, judgment, decree or ruling of
any governmental authority to which the Company is subject (a "Violation"). If
and to the extent (but only to the extent) that any purchase of this Warrant
would result in a Violation, the Company shall purchase and pay for only that
portion of this Warrant, if any, that would not result in a Violation, and the
remaining purchase obligation of the Company shall continue in full force and
effect and shall be due and payable at the earliest date on which such purchase
would not result in a Violation, and until such date, the remaining purchase
price of this Warrant shall accrue interest shall accrue simple interest
(payable upon the payment of such principal amount) at a variable rate equal to
the rate per annum publicly announced by Bank One, N.A., from time to time as
its prime (or base) rate.
Section 9. Restrictions on Assignment and Exercise of Warrant.
Notwithstanding any other provisions of this Warrant, the Holder may not
exercise the Warrant in whole or in part or exercise any of Holder's rights
11
pursuant to Section 8 at any time the Holder is not in full compliance with its
obligations under the Credit Agreement between the Holder and the Company as of
the date that the Holder seeks to exercise any of its rights hereunder.
Section 10. No Rights as Shareholder. Nothing contained herein shall be
construed as conferring upon the Holder hereof the right to vote or to receive
dividends or to consent to or receive notice as a shareholder of the Company in
respect of any meeting of shareholders for the election of directors of the
Company or any other matter, or any rights whatsoever as a shareholder of the
Company.
Section 11. Registration Rights. If the Company enters into an agreement (a
"Registration Rights Agreement") with any of its holders of Common Stock or any
person that holds securities convertible into Common Stock pursuant to which the
Company is or may be required to register shares of Common Stock under the
Securities Act of 1933, the Company shall provide Holder with a notice of such
agreement which shall include a copy of the agreement. For a period of thirty
(30) days following such notice, the Holder shall have the right to become a
party to such Registration Rights Agreement on the same terms and conditions as
the holders of registerable securities. The Holder shall be entitled to be a
party to only one Registration Rights Agreement, and if the Company enters into
more than one Registration Rights Agreement, the Holder shall be entitled to
become a party to each such agreement, but the Company may require the Holder to
terminate its rights pursuant to any Registration Rights Agreement to which is
he then a party as a condition to becoming a party to a subsequent Registration
Rights Agreement. In the event of the occurrence of a transaction described in
Section 7.3, the Company shall use its best efforts to obtain for Holder
registration rights with respect to the securities into which this Warrant is
convertible subsequent to such transaction comparable to the rights specified in
this Section.
Section 12. Notices. Any notice pursuant to this Warrant by the Holder of
this Warrant to the Company shall be in writing and shall be deemed to have been
duly given if and when delivered or mailed by certified mail, return receipt
requested, to the Company at its Principal Office. Any notice pursuant to this
Warrant by the Company to the Holder of this Warrant shall be in writing and
shall be deemed to have been duly given if and when mailed, postage prepaid, to
such Holder at its last address as it appears in the Warrant Register.
Section 13. Successors. All the covenants and provisions of this Warrant by
or for the benefit of the Company shall bind and inure to the benefit of its
successors and assigns hereunder. The Company shall not merge or consolidate
with or into any other person unless the person resulting from such merger or
consolidation (if not the Company) shall expressly assume the due and punctual
performance and observance of each and every covenant and condition of this
Warrant to be performed and observed by the Company.
Section 14. Captions. The captions of the sections of this Warrant have
been inserted for convenience only and shall have no substantive effect.
12
Section 15. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of Indiana, without regard to the
conflicts of laws principles thereof.
Dated: ___________________
HEARTGEN CENTERS, INC.
By ___________________________
[Name]
[Title]
ATTEST:
-----------------------------
Secretary
13
HEARTGEN CENTERS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
PURCHASE FORM
The undersigned registered Holder hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant for, and to purchase
thereunder, ____________ shares of the stock provided for therein, and tenders
herewith payment of the aggregate Warrant Price of such shares in the form of a
certified or official bank check payable to the order of the Company in the
amount of $_______________. The undersigned Holder requests that certificates
for such shares be issued in the name of such Holder, as follows:
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(PLEASE PRINT NAME, ADDRESS AND FEDERAL TAX I.D. NUMBER)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
If said number of shares shall not be all the shares purchasable under the
within Warrant, the undersigned Holder requests that a new Warrant for the
balance remaining of the shares purchasable under the within Warrant be
registered in the name of the undersigned Holder as below indicated and
delivered to the address stated below.
Dated: __________________________
Name of
Holder:_________________________________________________________________
(PLEASE PRINT)
Address:______________________________________________________________________
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Signature:__________________________________
14
HEARTGEN CENTERS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered Holder does hereby sell,
assign and transfer unto:
------------------------------------------------------------------------------
(PLEASE PRINT NAME, ADDRESS FEDERAL TAX I.D. NUMBER OF ASSIGNEE)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
the within Warrant and hereby authorizes the transfer of registration of such
Warrant to the assignee on the Warrant Register. The undersigned further directs
the Company to issue and deliver to the assignee, at the address set forth
above, a new Warrant of like tenor and representing the right to purchase the
same number of Shares as the within Warrant entitles the undersigned to
purchase.
Dated: _________________________
Name of
Holder:_________________________________________________________________
(PLEASE PRINT)
Address:______________________________________________________________________
-----------------------------------------------------------------------
Signature:___________________________________
15
Exhibit A
