1
EXHIBIT 10.16
STOCK PURCHASE WARRANT
This Warrant is issued this 31st day of March, 1995, by EDUCATIONAL
MEDICAL, INC., a Delaware corporation (the "Company"), to SIRROM CAPITAL
CORPORATION, a Tennessee corporation (SIRROM CAPITAL CORPORATION and any
subsequent assignee or transferee hereof are hereinafter referred to
collectively as "Holder" or "Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT: TERM. For and in consideration of SIRROM
CAPITAL CORPORATION making a loan to the Company in an amount of Two Million Two
Hundred Thousand and no/100ths Dollars ($2,200,000.00) pursuant to the terms of
a secured promissory note of even date herewith (the "Note") and related loan
agreement of even date herewith (the "Loan Agreement"), and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 85,000
shares (the "Shares") of the Company's common stock (the "Common Stock"),
provided that in the event that the indebtedness evidenced by the Note is
outstanding on the following dates, the Base Amount shall be increased to the
corresponding number set forth below:
Date Base Amount
--------------------------- ------------------------------------
March __, 1999 135,000 shares
March __, 2000 185,000 shares
The shares of Common Stock issuable upon exercise of this Warrant are
hereinafter referred to as the "Shares." This Warrant shall be exercisable at
any time and from time to time from the date hereof until April 30, 2000.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the terms
of this Warrant shall be One Cent ($.01).
3. EXERCISE. This Warrant may be exercised by the Holder hereof
(but only on the conditions hereinafter set forth) as to all or any increment
or increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx 00000 or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The
Exercise Price shall be payable, at the option of the Holder, (i) by certified
or bank check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant having a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, the
Company shall as promptly as practicable, and in any event within fifteen (15)
days thereafter, execute and deliver to the Holder
2
of this Warrant a certificate or certificates for the total number of whole
Shares for which this Warrant is being exercised in such names and denominations
as are requested by such Holder. If this Warrant shall be exercised with
respect to less than all of the Shares, the Holder shall be entitled to receive
a new Warrant covering the number of Shares in respect of which this Warrant
shall not have been exercised, which new Warrant shall in all other respects
be identical to this Warrant. The Company covenants and agrees that it will pay
when due any and all state and federal issue taxes which may be payable in
respect of the issuance of this Warrant or the issuance of any Shares upon
exercise of this Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities laws. ("Blue Sky Laws"). This Warrant has been acquired
for investment purposes and not with a view to distribution or resale and
may not be pledged, hypothecated, sold, made subject to a security
interest, or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable
Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company and its counsel, that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws (the Company hereby acknowledges that Bass,
Xxxxx & Xxxx is acceptable counsel). Transfer of the shares issued upon
the exercise of this Warrant shall be restricted in the same manner and
to the same extent as the Warrant and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT UNDER THE ACT OR SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO, OR (II) IN THE OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS OR SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
WITH SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents
and instruments as counsel for the Company reasonably deems necessary to
effect the compliance of the issuance of this Warrant and any shares of
Common Stock issued upon exercise hereof with applicable federal and
state securities laws.
(b) The Company covenants and agrees that all Shares which may
be issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens,
2
3
charges and preemptive rights, if any, with respect thereto or to the
issuance thereof. The Company shall at all times reserve and keep
available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell any
shares of the Company's capital stock at a price below the fair market
value of such shares, without the prior written consent of the Holder
hereof. In the event that the Company sells shares of the Company's
capital stock in violation of this Section 4(c), the number of shares
issuable upon exercise of this Warrant shall be equal to the product
obtained by multiplying the number of shares issuable pursuant to this
Warrant prior to such sale by the quotient obtained by dividing (i) the
fair market value of the shares issued in violation of this Section 4(c)
by (ii) the price at which such shares were sold.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4
hereof, this Warrant may be transferred, in whole or in part, to any person or
business entity, by presentation of the Warrant to the Company with written
instructions for such transfer. Upon such presentation for transfer, the
Company shall promptly execute and deliver a new Warrant or Warrants in the form
hereof in the name of the assignee or assignees and in the denominations
specified in such instructions. The Company shall pay all expenses incurred by
it in connection with the preparation, issuance and delivery of Warrants under
this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE
RIGHTS. Except as otherwise provided herein, this Warrant does not confer upon
the Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the holders
of the Company's common stock the right to purchase any securities of the
Company, then all shares of Common Stock that are subject to this Warrant shall
be deemed to be outstanding and owned by the Holder and the Holder shall be
entitled to participate in such rights offering. The Company shall not grant
any preemptive rights with respect to any of its capital stock without the prior
written consent of the Holder.
7. OBSERVATION RIGHTS. The Holder of this Warrant shall receive
notice of and be entitled to attend or may send a representative to attend all
meetings of the Company's Board of Directors in a non-voting observation
capacity and shall receive a copy of all correspondence and information
delivered to the Company's Board of Directors, from the date hereof until such
time as the indebtedness evidenced by the Note has been paid in full.
3
4
8. ADJUSTMENT UPON CHANGES IN STOCK.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization, combination
of shares of the Company, or other similar event, occurring after the date
hereof, then the Holder exercising this Warrant shall receive, for the
aggregate price paid upon such exercise, the aggregate number and class of
shares which such Holder would have received if this Warrant had been exercised
immediately prior to such stock split, stock dividend, recapitalization,
combination of shares, or other similar event. If any adjustment under this
Section 8(a), would create a fractional share of Common stock or a right to
acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares subject to this Warrant shall be the
next higher number of shares, rounding all fractions upward. Whenever there
shall be an adjustment pursuant to this Section 8(a), the Company shall
forthwith notify the Holder or Holders of this Warrant of such adjustment,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event, occurring
after the date hereof, as a result of which shares of Common Stock shall be
changed into the same or a different number of shares of the same or another
class or classes of securities of the Company or another entity, then the
Holder exercising this Warrant shall receive, for the aggregate price paid upon
such exercise, the aggregate number and class of shares which such Holder would
have received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization or
liquidation, or other similar event. If any adjustment under this Section 8(b)
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded
and the number of shares subject to this Warrant shall be the next higher number
of shares, rounding all fractions upward. Whenever there shall be an
adjustment pursuant to this Section 8(b), the Company shall forthwith notify
the Holder or Holders of this Warrant of such adjustment, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated.
9. CERTAIN NOTICES. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock
or make any special dividend or other distribution to the holders of its Common
Stock;
(c) offer for subscription to the holders of any of its Common
Stock any additional shares of stock in any class or other rights;
4
5
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or substantially
all of its assets to, another corporation; or
(e) voluntarily or involuntarily dissolve, liquidate or wind up of
the affairs of the Company;
then, in any one or more of said cases, the Company shall give to the Holder of
the Warrant, by certified or registered mail, (i) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of
any such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required by
clause (ii) shall specify the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
5
6
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
EDUCATIONAL MEDICAL, INC.,
a Delaware corporation
By: /s/
--------------------------
Title: President
---------------------
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: /s/
---------------------------
Title: CPO
----------------------
6
