Contract
Exhibit
10.2
AN
INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. HOLDERS MUST
RELY
ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED.
|
Warrant
to Purchase
|
||
|
___,000,000
shares
|
Warrant
Number WA-____
|
Warrant
to Purchase Common Stock
of
THIS
CERTIFIES that BRIDGEPOINTE MASTER FUND LTD., a Cayman Islands Exempted Company
or any subsequent holder hereof (“Holder”)
has the
right to purchase from
Virtualscopics, Inc.
a
Delaware corporation, (the “Company”),
up to
_____ Million (___,000,000) fully paid and nonassessable shares, of the
Company’s common stock, $0.001 par value per share (“Common
Stock”),
subject to adjustment as provided herein, at a price equal to the Exercise
Price
as defined in Section 3 below, at any time during the Term (as defined below).
Holder
agrees with the Company that this Warrant to Purchase Common Stock of the
Company (this “Warrant”
or this
“Agreement”)
is
issued and all rights hereunder shall be held subject to all of the conditions,
limitations and provisions set forth herein.
1. Date
of Issuance and Term.
This
Warrant shall be deemed to be issued on September 13, 2007 (“Date
of Issuance”).
The
term of this Warrant begins on the Date of Issuance and ends at 5:00 p.m.,
New
York City time, on the date that is seven (7) years after the Date of Issuance
(the “Term”).
This
Warrant was issued in conjunction with the issuance of Series B Preferred Stock
of the Company (“the “Preferred
Stock”)
to the
Holder pursuant to the terms of the Securities Purchase Agreement (“Securities
Purchase Agreement”)
dated
September ___, 2007, and the Certificate of Designation of Rights and
Preferences of the Company’s Series B Convertible Preferred Stock (the
“Certificate
of Designation”)
and the
Registration Rights Agreement (“Registration
Rights Agreement”)
by and
between the Company and Holder dated on or about September 12, 2007.
Notwithstanding
anything to the contrary herein, the applicable portion of this Warrant shall
not be exercisable during any time that, and only to the extent that, the number
of shares of Common Stock to be issued to Holder upon such Exercise (as defined
in Section 2(a)), when added to the number of shares of Common Stock, if any,
that the Holder otherwise beneficially owns (outside of this Warrant, and not
including any other warrants or securities of Holder’s having a provision
substantially similar to this paragraph) at the time of such Exercise, would
exceed 4.99% (the “Maximum
Percentage”)
of the
number of shares of Common Stock outstanding immediately after giving effect
to
the issuance of shares of Common Stock issuable upon Exercise of this Warrant
held by the Holder, as determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934 (the “Beneficial
Ownership Limitation”).
The
Beneficial Ownership Limitation shall be conclusively satisfied if the
applicable Notice of Exercise includes a signed representation by the Holder
that the issuance of the shares in such Notice of Exercise will not violate
the
Limitation, and the Company shall not be entitled to require additional
documentation of such satisfaction.
Notwithstanding
the above, in the event that the Company receives any purchase, tender or
exchange offer or any offer to enter into a merger with another entity whereby
the Company shall not be the surviving entity (an “Offer”),
then
the Maximum Percentage shall be increased (but not decreased) to 9.99%, and
“4.99%” shall be automatically revised immediately after such offer to read
“9.99%” each place it occurs in this Section 1. The Beneficial Ownership
Limitation provisions of this Section 1 may be waived by such Holder, at the
election of such Holder, upon not less than 61 days’ prior notice to the
Company, to change the Beneficial Ownership Limitation to any amount not in
excess of 9.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon
Exercise of this Warrant held by the Holder and the Beneficial Ownership
Limitation shall continue to apply. Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
such Holder, provided that, if an Event of Default occurs, thereafter the
Beneficial Ownership Limitation provisions of this Section 1 may be waived
by
such Holder, at the election of such Holder, upon not less than 61 days’ prior
notice to the Company, to change the Maximum Percentage to any other percentage
(and not limited to 9.99%) of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of shares of Common
Stock upon Exercise of the Warrants held by the Holder and the provisions of
this Section 1 shall continue to apply. The limitations on Exercise set forth
in
this subsection are referred to as the “Beneficial
Ownership Limitations.”
The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 1 to correct
this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
limitation.
Notwithstanding
the above, Holder shall retain the option to either Exercise or not Exercise
its
option(s) to acquire Common Stock pursuant to the terms hereof after an Offer,
and, in the event of a cash Exercise following a tender offer, the Exercise
Price per share that would otherwise be due shall instead be offset against
the
tender price per share to be received by the Holder, provided, however, that
in
the event a tender offer is not completed, Holder, at its option may either
(i)
complete any Exercise that was initiated after the Offer by promptly paying
to
the Company the Exercise Price that would have been due at the time the Warrant
was Exercised, or (ii) cancel such Exercise by providing written notice to
the
Company, in which case such Exercise shall be deemed void ad
initio.
2
Maximum
Exercise of Rights.
In the
event the Holder notifies the Company that the Exercise of the rights described
herein would result in the issuance of an amount of Common Stock of the Company
that would exceed the maximum amount that may be issued to a Holder calculated
in the manner described above, then the issuance of such additional shares
of
Common Stock of the Company to such Holder will be deferred in whole or in
part
until such time as such Holder is able to beneficially own such Common Stock
without exceeding the maximum amount calculated in the manner described herein.
The determination of when such Common Stock may be issued shall be made by
each
Holder as to only such Holder.
2. Exercise.
(a)
Manner of Exercise. During
the Term and at any time on or after the Shareholder Issuance Vote (as defined
in the Securities Purchase Agreement) and the effective date of the written
consents given therefor, but in any event at any time after the Shareholder
Issuance Approval Deadline (as defined in the Securities Purchase Agreement)
this Warrant may be Exercised as to all or any lesser number of full shares
of
Common Stock covered hereby (the “Warrant
Shares”
or the
“Shares”)
upon
surrender of this Warrant, with the Notice of Exercise Form attached hereto
as
Exhibit
A
(the
“Notice
of Exercise”)
duly
completed and executed, together with the full Exercise Price (as defined below,
which may be satisfied by either a Cash Exercise or a Cashless Exercise, as
each
is defined below) for each share of Common Stock as to which this Warrant is
Exercised, at the office of the Company, VirtualScopics,
Inc.;
000
Xxxxxx Xxxx, Xxxxxxxxx, XX 00000; Phone: 000-000-0000, Fax: 000-000-0000, or
at
such other location as the Company may then be located or such other office
or
agency as the Company may designate in writing, by overnight mail, by facsimile
(such surrender and payment of the Exercise Price hereinafter called the
“Exercise”
of this
Warrant). In the case of a Cashless Exercise, the Exercise Price is deemed
to
have been delivered upon the Holder’s deliver of a Notice of Exercise to the
Company.
(b)
Date of Exercise. The
“Date
of Exercise”
of the
Warrant shall be defined as the date that a copy of the Notice of Exercise
Form
attached hereto as Exhibit A, completed and executed, is sent by facsimile
to
the Company, provided that the original Warrant and Notice of Exercise Form
are
received by the Company and the Exercise Price is satisfied within 1 Business
Day thereafter or else the Date of Exercise shall be deemed the Business Day
that the Notice of Exercise Form, Original Warrant and Exercise Price are
received by the Company. Alternatively, the Date of Exercise shall be defined
as
the date the original Notice of Exercise Form, Original Warrant and Exercise
Price are received by the Company, if Holder has not sent advance notice by
facsimile. Upon
delivery of the Date
of
Exercise,
the Holder shall be deemed for all corporate purposes to have become the holder
of record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares as the case may be. The Company shall deliver any objection
to any Notice of Exercise within three (3) Business Days of receipt of such
notice. In the event of any dispute or discrepancy, the records of the Company
shall be controlling and determinative in the absence of manifest
error.
3
(c)
Delivery of Common Stock Upon Exercise.
Within 3
Trading Days from the delivery to the Company of the Notice of Exercise,
surrender of this Warrant and payment of the aggregate Exercise Price (which,
in
the case of a Cashless Exercise, shall be deemed to have been paid upon the
submission by the Holder of a Notice of Exercise)(the “Warrant
Shares Delivery Deadline”),
the
Company shall issue and deliver (or cause its transfer agent so to issue and
deliver) in accordance with the terms hereof to or upon the order of the Holder
that number of shares of Common Stock (“Exercise
Shares”)
for the
portion of this Warrant converted as shall be determined in accordance herewith.
Upon the Exercise of this Warrant or any part thereof, the Company shall, at
its
own cost and expense, take all necessary action, including obtaining and
delivering, an opinion of counsel to assure that the Company’s transfer agent
shall issue stock certificates in the name of Holder (or its nominee) or such
other persons as designated by Holder and in such denominations to be specified
at Exercise representing the number of shares of Common Stock issuable upon
such
Exercise. The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the Company’s
Common Stock. If the Company fails for any reason to deliver to the Holder
certificates evidencing the Warrant Shares subject to a Notice of Exercise
by
the Warrant Share Delivery Deadline (a “Warrant
Share Delivery Failure”).
(d)
(Omitted)
(e)
(Omitted)
(f)
Revocation of Exercise Upon Delivery
Failure. In
addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of the Exercise
Shares by the Warrant Shares Delivery Deadline, the Holder will be entitled
to
revoke all or part of the relevant Notice of Exercise by delivery of a notice
to
such effect to the Company whereupon the Company and the Holder shall each
be
restored to their respective positions immediately prior to the delivery of
such
notice, except that the liquidated damages described above shall be payable
through the date notice of revocation or rescission is given to the
Company.
(g)
Legends.
(i)
Restrictive
Legend.
The
Holder understands that the Warrant and, until such time as Exercise Shares
have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement or otherwise may be sold pursuant to Rule 144 or Rule 144(k) under
the
1933 Act without any restriction as to the number of securities as of a
particular date that can then be immediately sold, the Exercise Shares may
bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such
securities):
4
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
COUNSEL TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.”
(ii)
Removal
of Restrictive Legends.
Certificates evidencing the Exercise Shares shall not contain any legend
restricting the transfer thereof (including the legend set forth above in
subsection 2(g)(i)): (i) following resale of such shares while a registration
statement (including the Registration Statement, as defined in the Registration
Rights Agreement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Exercise Shares pursuant
to
Rule 144, or (iii) if such Exercise Shares are eligible for sale under Rule
144(k), or (iv) if such legend is not required under applicable requirements
of
the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission) (collectively, the “Unrestricted
Conditions”).
The
Company shall cause its counsel to issue a legal opinion to the Company’s
transfer agent promptly after the Effective Date (as defined below) of the
Registration Statement if required by the Company’s transfer agent to effect the
sale of Exercise Shares by Holder without a restrictive legend or removal of
the
legend hereunder. If the Unrestricted Conditions are met at the time of issuance
or resale of Exercise Shares, then such Exercise Shares shall be issued free
of
all legends and
Holder submits proof and proper documentation satisfactory to the Company and
its transfer agent to the conditions in this Section 2(g).
The
Company agrees that following the Effective Date or at such time as the
Unrestricted Conditions are met or such legend is otherwise no longer required
under this Section 2(g), it will, no later than three (3) Trading Days following
the delivery (the “Unlegended
Shares Delivery Deadline”)
by the
Holder to the Company or the Company’s transfer agent of a certificate
representing Exercise Shares, as applicable, issued with a restrictive legend
and
proof
and proper documentation satisfactory to the Company and its transfer agent
to
the conditions in this Section 2(g) (such
third Trading Day, the “Legend
Removal Date”),
deliver or cause to be delivered to such Holder a certificate (or electronic
transfer) representing such shares that is free from all restrictive and other
legends. For purposes hereof, “Effective
Date”
shall
mean the date that the Registration Statement that the Company is required
to
file pursuant to the Registration Rights Agreement has been declared effective
by the Securities and Exchange Commission (the “Commission”).
(iii)
Sale
of Unlegended Shares.
Holder
agrees that the removal of the restrictive legend from certificates representing
Securities as set forth in this Section 2(g)(i) above is predicated upon the
Company’s reliance that the Holder will sell any Exercise Shares pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and
that
if Securities are sold pursuant to a Registration Statement, they will be sold
in compliance with the plan of distribution set forth therein.
5
(h)
Cancellation of Warrant. This
Warrant shall be canceled upon the full Exercise of this Warrant, and, as soon
as practical after the Date of Exercise, Holder shall be entitled to receive
Common Stock for the number of shares purchased upon such Exercise of this
Warrant, and if this Warrant is not Exercised in full, Holder shall be entitled
to receive a new Warrant (containing terms identical to this Warrant)
representing any unexercised portion of this Warrant in addition to such Common
Stock.
(i)
Holder of Record. Each
person in whose name any Warrant for shares of Common Stock is issued shall,
for
all purposes, be deemed to be the Holder of record of such shares on the Date
of
Exercise of this Warrant, irrespective of the date of delivery of the Common
Stock purchased upon the Exercise of this Warrant. Nothing in this Warrant
shall
be construed as conferring upon Holder any rights as a stockholder of the
Company.
(j) Delivery
of Electronic Shares. In
lieu
of delivering physical certificates representing the unlegended shares of Common
Stock issuable
upon Exercise
(the
“Unlegended
Shares”),
provided the Company’s transfer agent is participating in the Depository
Trust
Company
(“DTC”)
Fast
Automated Securities Transfer (“FAST”)
program, upon
written request
of the Holder, so long as the certificates therefor do not bear a
legend,
are not
required to bear a legend,
and the
Holder is not obligated to return such certificate for the placement of a legend
thereon, the
Company
shall cause its transfer agent to electronically transmit the Unlegended Shares
to the Holder by crediting the account of the Holder’s prime broker with
DTC
identified in the written request
through
its Deposit Withdrawal Agent Commission (“DWAC”)
system.
(k)
Buy-In.
In
addition to any other rights available to the Holder, if the Company fails
to
cause its transfer agent to transmit to the Holder a certificate or certificates
representing the Exercise Shares pursuant to an Exercise on or before the fifth
(5th)
Business Day after the Warrant Share Delivery Date (other
than for circumstances related to an outbreak of hostilities, terrorist
activities or war, the effects of weather or meteorological events, acts of
God
or other calamity or crisis),
and if
after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Exercise Shares which the Holder anticipated receiving upon such
Exercise (a “Buy-In”),
then
the Company shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Exercise Shares that the Company was required
to
deliver to the Holder in connection with the Exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion
of
the Warrant and equivalent number of Exercise Shares for which such Exercise
was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its Exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect
to
an attempted Exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of the
immediately preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice indicating the
amounts payable to the Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company. Nothing
herein shall limit a Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock
upon
Exercise of the Warrant as required pursuant to the terms hereof.
6
(l)
Surrender of Warrant Upon Exercise; Book-Entry.
Notwithstanding anything to the contrary set forth herein, upon Exercise of
this
Warrant in accordance with the terms hereof, the Holder shall not be required
to
physically surrender the original Warrant Certificate to the Company unless
all
of this Warrant is Exercised, in which case such Holder shall deliver the
original Warrant being Exercised to the Company within one (1) Business Day
following the Date of Exercise at issue. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the outstanding number
of
Warrant Shares purchasable hereunder in an amount equal to the applicable number
of Warrant Shares purchased. The Holder and the Company shall maintain records
showing the amount of this Warrant that is so Exercised and the dates of such
Exercises or shall use such other method, reasonably satisfactory to the Holder
and the Company, so as not to require physical surrender of this original
Warrant upon each such Exercise. In the event of any dispute or discrepancy,
such records of the Company shall be controlling and determinative in the
absence of manifest error. The Holder and any assignee, by acceptance of this
Warrant, acknowledge and agree that, by reason of the provisions of this
paragraph, following the purchase of a portion of the Warrant Shares hereunder,
the number of Warrant Shares available for purchase hereunder at any given
time
may be less than the amount stated on the face hereof.
3. Payment
of Warrant Exercise Price.
(a)
Exercise Price.
The
Exercise Price (“Exercise
Price”)
shall
initially equal $____ per share (the “Initial
Exercise Price”),
subject to adjustment pursuant to the terms hereof, including but not limited
to
Section 5 below.
Payment
of the Exercise Price may be made by either of the following, or a combination
thereof, at the election of Holder:
(i) Cash
Exercise:
The
Holder may exercise this Warrant in cash,
bank or cashiers check or wire transfer (a “Cash
Exercise”);
or
(ii) Cashless
Exercise:
The
Holder, at its option, may exercise this Warrant in a cashless exercise
transaction. In order to effect a Cashless Exercise, the Holder
shall surrender
of this Warrant at the principal office of the Company together with notice
of
cashless election, in which event the Company shall issue Holder a number of
shares of Common Stock computed using the following formula (a “Cashless
Exercise”):
7
X
= Y
(A-B)/A
where: X
= the
number of shares of Common Stock to be issued to Holder.
Y
= the
number of shares of Common Stock for which this Warrant is being Exercised.
A
= the
Market Price of one (1) share of Common Stock (for purposes of this Section
3(ii), where “Market
Price,”
as of
any date, means the Volume Weighted Average Price (as defined herein) of the
Company’s Common Stock during the five
(5)
consecutive trading day period immediately preceding the date of Exercise,
or
other applicable date.
B
= the
Exercise Price.
As
used
herein, the “Volume
Weighted Average Price”
or
“VWAP”
for any
security as of any date means the volume weighted average sale price on the
Over
the Counter Electronic Bulletin Board (the “OTC-BB”)
as
reported by, or based upon data reported by, Bloomberg Financial Markets or
an
equivalent, reliable reporting service mutually acceptable to and hereafter
designated by holders of a majority in interest of the Warrants and the Company
(“Bloomberg”)
or, if
the OTC-BB is not the principal trading market for such security, the volume
weighted average sale price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or, if no volume weighted average sale price is reported for
such
security, then the last closing trade price of such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security
by
Bloomberg, the average of the bid prices of any market makers for such security
that are listed in the “pink
sheets”
by the
National Quotation Bureau, Inc. If the Volume Weighted Average Price cannot
be
calculated for such security on such date in the manner provided above, the
volume weighted average price shall be the fair market value as mutually
determined by the Company and the holders of a majority in interest of the
Warrants being Exercised for which the calculation of the volume weighted
average price is required in order to determine the Exercise Price of such
Warrants. “Trading
Day”
shall
mean any day on which the Common Sock is traded for any period on the OTC-BB,
or
on the principal securities exchange or other securities market on which the
Common Stock is then being traded.
For
purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon Exercise of
this
Warrant in a cashless Exercise transaction shall be deemed to have been acquired
at the time this Warrant was issued. Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon Exercise
of this Warrant in a cashless Exercise transaction shall be deemed to have
commenced on the date this Warrant was issued.
(b) Dispute
Resolution. In
the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the number of Warrant Shares issuable upon any
exercise of this Warrant, the Company shall promptly issue to the Holder the
number of Warrant Shares that are not disputed and resolve such dispute in
accordance with this subsection. In the case of a dispute as to the
determination of the closing price or the Volume Weighted Average Price of
the
Company’s Common Stock or the arithmetic calculation of the Exercise Price,
Market Price or any Redemption Price, or the determination of whether or not
a
Dilutive Issuance or a Milestone Failure has occurred, the Company shall submit
the disputed determinations or arithmetic calculations via facsimile within
five
(5) Business Days of receipt, or deemed receipt, of the Notice of Exercise
or
Redemption Notice or other event giving rise to such dispute, as the case may
be, to the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within five (5) Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then
the
Company shall, within five (5) Business Days submit via facsimile (i) the
disputed determination of the closing price or the Volume Weighted Average
Price
of the Company’s Common Stock to an independent, reputable investment bank
selected by the Company and approved by the Holder, which approval shall not
be
unreasonably withheld, (ii) the disputed arithmetic calculation of the Exercise
Price, Market Price or any Redemption Price to the Company’s independent,
outside accountant or (iii) the disputed facts regarding the occurrence of
a
Dilutive Issuance or Milestone Failure (or any other matter referred to above
that is not expressly designated to the independent investment bank or the
independent outside accountant pursuant to (i) or (ii) immediately above) to
an
expert attorney from a nationally recognized outside law firm (having at least
100 attorneys and having with no prior relationship with the Company) selected
by the Company and approved by the Holder. The Company shall request that the
investment bank or the accountant, law firm, or other expert, as the case may
be, to perform the determinations or calculations and notify the Company and
the
Holder of the results no later than ten (10) Business Days from the time it
receives the disputed determinations or calculations. Such investment bank’s or
accountant’s or law firm’s determination or calculation, as the case may be,
shall be binding upon all parties absent demonstrable error (collectively,
the
“Dispute
Resolution Procedures”).
8
4. Transfer
and Registration.
(a) Transfer
Rights. Subject
to the provisions of Section 8 of this Warrant, this Warrant may be transferred
on the books of the Company, in whole or in part, in person or by attorney,
upon
surrender of this Warrant properly completed and endorsed. This Warrant shall
be
canceled upon such surrender and, as soon as practicable thereafter, the person
to whom such transfer is made shall be entitled to receive a new Warrant or
Warrants as to the portion of this Warrant transferred, and Holder shall be
entitled to receive a new Warrant as to the portion hereof retained.
(b) Registrable
Securities. The
Common Stock issuable upon the Exercise of this Warrant has registration rights
pursuant to that certain Registration Rights Agreements between the Company
and
the Holder dated even herewith.
5. Anti-Dilution
Adjustments; Additional Adjustments; Purchase Rights.
(a) (Omitted).
9
(b) Recapitalization
or Reclassification. If
the
Company shall at any time effect a recapitalization, reclassification or other
similar transaction of such character that the shares of Common Stock shall
be
changed into or become exchangeable for a larger or smaller number of shares,
then upon the effective date thereof, the number of shares of Common Stock
which
Holder shall be entitled to purchase upon Exercise of this Warrant shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease in the number of shares of Common Stock by reason of such
recapitalization, reclassification or similar transaction, and the Exercise
Price shall be, in the case of an increase in the number of shares,
proportionally decreased and, in the case of decrease in the number of shares,
proportionally increased. The Company shall give Holder the same notice it
provides to holders of Common Stock of any transaction described in this Section
5(b).
(c)
Exercise Price Adjusted. As
used
in this Warrant, the term “Exercise
Price”
shall
mean the purchase price per share specified in Section 3 of this Warrant, until
the occurrence of an event stated in this Section 5 or otherwise set forth
in
this Warrant, and thereafter shall mean said price as adjusted from time to
time
in accordance with the provisions of said subsection. No such adjustment under
this Section 5 shall be made unless such adjustment would change the Exercise
Price at the time by $.01 or more; provided, however, that all adjustments
not
so made shall be deferred and made when the aggregate thereof would change
the
Exercise Price at the time by $.01 or more. No adjustment made pursuant to
any
provision of this Section 5 shall have the net effect of increasing the Exercise
Price in relation to the split adjusted and distribution adjusted price of
the
Common Stock.
(d)
Adjustments: Additional Shares, Securities or Assets. In
the
event that at any time, as a result of an adjustment made pursuant to this
Section 5 or otherwise, Holder shall, upon Exercise of this Warrant, become
entitled to receive shares and/or other securities or assets (other than Common
Stock) then, wherever appropriate, all references herein to shares of Common
Stock shall be deemed to refer to and include such shares and/or other
securities or assets; and thereafter the number of such shares and/or other
securities or assets shall be subject to adjustment from time to time in a
manner and upon terms as nearly equivalent as practicable to the provisions
of
this Section 5.
(e)
Adjustments to Conversion Price Due to Subsequent Equity Sales.
If at
any time after the Date of Issuance for so long as any Warrants are outstanding,
the Company or any Subsidiary, as applicable, sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of
or
issues (or announces any sale, grant or any option to purchase or other
disposition), any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock at an effective price per share that is lower
than the then Conversion Price (such lower price, the “Base
Conversion Price”
and such
issuances, collectively, a “Dilutive
Issuance”)
(if the
holder of the Common Stock or Common Stock Equivalents so issued shall at any
time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such
issuance, be entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance shall be deemed
to have occurred for less than the Conversion Price on such date of the Dilutive
Issuance), regardless of whether or not any such issuance or repricing of
securities is conditional upon circumstances or events that may occur in the
future, then the Conversion Price shall be reduced (each, a“Dilutive
Issuance Adjustment”)
to equal
the Base Conversion Price. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no
adjustment will be made under this Section 5(e) in respect of an Exempt Issuance
(as defined in the Securities Purchase Agreement) or
in
respect of Adjustment Exceptions (as defined below).
If the
Company issues Prohibited Equity Securities, despite the prohibition set forth
in the Securities Purchase Agreement, the Company shall be deemed to have issued
Common Stock or Common Stock Equivalents at the lowest possible conversion
price
at which such securities may be converted or exercised. The Company shall notify
the Holder in writing, no later than 5 Business Days following the issuance
of
any Common Stock or Common Stock Equivalents subject to this Section 5(e),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms (such notice, the
“Dilutive
Issuance Notice”).
For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 5(e), upon the occurrence of any
Dilutive Issuance, the Holder is entitled to receive a number of Conversion
Shares based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether the Holder accurately refers to the
Base Conversion Price in the Notice of Conversion. No adjustment shall be made
hereunder if such adjustment would result in an increase of the Conversion
Price
then in effect.
10
For
purposes hereof:
“Adjustment
Exceptions” shall
mean all shares of Common Stock or Common Stock Equivalents issued (A) pursuant
to any Approved Stock Plan (as
defined in the Securities Purchase Agreement),
(B)
upon the exercise, exchange of, conversion or redemption of, or payment of
interest or liquidated or similar damages on, any securities issued hereunder,
or in connection with the Offering, or to a Placement Agent in connection with
the Offering (as
defined in the Securities Purchase Agreement),
(C)
upon the exercise, exchange, conversion, or redemption of Common Stock
Equivalents issued and outstanding on the Date of Issuance, provided that the
terms of such Common Stock Equivalents are not amended after the Date of
Issuance, (D) in connection with any acquisition by the Company or any
Subsidiary, whether through an acquisition of stock or a merger of any business,
assets or technologies the primary purpose of which is not to raise equity
capital,
and (E)
in connection with an adjustment previously made pursuant to Section 5 (b),
(f)
or (i).
“Approved
Stock Plan”
shall
have the meaning ascribed to it in the Securities Purchase Agreement.
“Common
Stock Equivalents,” “Exempt
Issuance” and
“Prohibited
Equity Securities”
shall
each have the meanings ascribed to them in the Securities Purchase Agreement.
“Convertible
Securities”
means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Stock.
11
“Options”
means
any rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
(f) Subsequent
Rights Offerings.
If the
Company, at anytime prior to the date that all of the Warrants have been
Exercised, redeemed or otherwise satisfied in accordance with their terms,
shall
issue rights, options or warrants to all holders of Common Stock (and not to
Holders) entitling them to subscribe for or purchase shares of Common Stock
at a
price per share (the “Base
Rights Offering Price”)
that is
lower than the Exercise Price then in effect, then the Exercise Price then
in
effect shall be reduced (but not increased) to the Base Rights Offering Price
(a
“Subsequent
Rights Offering Adjustment”).
Such
adjustment shall be made whenever such rights or warrants are issued, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. No adjustment
shall be made hereunder if such adjustment would result in an increase of the
Exercise Price then in effect.
(g)
Milestone Adjustments
to Exercise Price.
The
Company has provided to the Holder pro forma financial projections and a list
of
milestone events that are evidenced on Schedule
5(g)
attached
hereto (the “Projections”).
If the
Company shall have failed (each a “Milestone
Failure”)
to meet
or exceed such Projections for any one or more of the following periods (each
a
“Milestone
Period”)
(i) the
twelve (12) month period ending December 31, 2007 and (ii) the twelve (12)
month
period ending December 31, 2008, respectively (each a “Milestone
Date”),
in
each case as reported in the Company’s Form 10-K for such fiscal year, then the
Exercise Price shall be reduced (but not increased) (a “Milestone
Adjustment”)
to
equal the lesser of (a) the Exercise Price then in effect, (b) the Market Price
as determined on the date that is five (5) Trading Days after the applicable
Milestone Date, or (c) the Market Price (as defined below) as determined on
the
date that is five (5) Trading Days after the date that Company files its next
Form 10-K with the Commission following the end of the applicable Milestone
Period (the “Milestone
Adjustment Price”).
Each
such
adjustment shall be effective as of the first day following each Milestone
Date
(by way of example, if the Projections are not met for the Milestone Period
ending December 31, 2007, the reduction is effective immediately on January
1,
2008). As to any Exercises by the Holder that occurred following the end of
a
Milestone Period but prior to the date the Company’s periodic report was filed
(“Interim
Period”),
the
Company shall retroactively send the Holder additional Warrant Shares within
3
Trading Days of the date of the applicable filing if an adjustment is required
hereunder (provided that to the extent any such shares would cause the
Beneficial Ownership Limitation to be exceeded, such excess shares shall not
be
issued and delivered until such time as such shares may be so issued without
exceeding the Beneficial Ownership Limitation). The number of additional Warrant
Shares issued shall be equal to the number of Warrant Shares receivable from
such Exercises based on the adjusted Exercise Price less any Warrant Shares
previously received on account of such Exercises. Any subsequent restatements
of
the Company’s financials shall require similar retroactive issuances if the
aforementioned events are subsequently deemed to have occurred. The Company
shall provide written notice to the Holder no later than 5 Business Day
following the Company’s filing of the applicable periodic report with the
Commission, indicating therein the new Exercise Price and the Revenue for the
applicable quarter. In the event that there is an adjustment to the Exercise
Price pursuant to any other provision under this Certificate of Designation
during the Interim Period, the Exercise Price shall be the lower of (i) the
Exercise Price as adjusted pursuant to the other provisions of this Certificate
of Designation and (ii) the new Exercise Price as determined hereunder.
Notwithstanding anything herein to the contrary, (i) the provision shall only
have the effect of reducing the Exercise Price and (ii) each adjustment shall
be
permanent notwithstanding future Revenue or the achievement of any other
milestones and cumulative with any other adjustments hereunder.
12
(h)
Adjustments to Exercise Price During Major Announcements.
Notwithstanding anything contained in this Warrant to the contrary, in the
event
the Company makes any public announcement (the date of such announcement is
hereinafter referred to as the “Announcement
Date”)
anytime
during the period beginning five (5) Business Days before any Milestone
Adjustment Date and ending five (5) Business Days after such Milestone
Adjustment Date (the “Protected
Period”),
then
the “Milestone
Adjustment Price”
for such
Milestone Adjustment shall equal the lesser of (X) the Milestone Adjustment
Price as determined pursuant to Section 5(g) above, (Y) the Market Price as
determined on the Trading Day immediately preceding the Announcement Date and
(Z) the Market Price as determined on the date that is ten (10) Trading Days
after the Announcement Date.
(i)
Subdivision or Combination of Common Stock.
If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the shares
of
Common Stock acquirable hereunder into a greater number of shares, then, after
the date of record for effecting such subdivision, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of shares represented by this Warrant shall proportionally increase.
If
the Company at any time combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date
of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number
of
shares represented by this Warrant shall proportionally decrease.
(j) Voluntary
Adjustment By Company.
The
Company may at any time during the term of this Warrant reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate
by
the Board of Directors of the Company (a “Voluntary
Adjustment”).
(k) Adjustment
to Number of Shares.
In the
event of any adjustment to the Exercise Price pursuant to the terms of this
Warrant, including but not limited to any Milestone Adjustment, any Dilutive
Issuance Adjustment any Subsequent Rights Offering Adjustment, or any Voluntary
Adjustment, the number of Warrant Shares issuable upon Exercise of this Warrant
shall be increased (except as otherwise provided in Section 5(b) or (i)) such
that the aggregate Exercise Price payable in a full Cash Exercise hereunder,
after taking into account the decrease in the Exercise Price, shall be equal
to
the aggregate Exercise Price payable in a full Cash Exercise prior to such
adjustment, and the number of Warrant Shares issuable in a Cashless Exercise
shall be increased accordingly.
13
(l) Notice
of Adjustments. Whenever
the Exercise Price is adjusted pursuant to the terms of this Warrant, the
Company shall within Five (5) Business Days mail to the Holder a notice (a
“Exercise
Price Adjustment Notice”)
setting
forth the Exercise Price after such adjustment and setting forth a statement
of
the facts requiring such adjustment. The Company shall, upon the written request
at any time of the Holder, furnish to such Holder a like Warrant setting forth
(i) such adjustment or readjustment, (ii) the Exercise Price at the time in
effect and (iii) the number of shares of Common Stock and the amount, if any,
of
other securities or property which at the time would be received upon Exercise
of the Warrant, following delivery of the original Warrant to the Company for
exchange. For purposes of clarification, whether or not the Corporation provides
an Exercise Price Adjustment Notice pursuant to this Section 5(l), upon the
occurrence of any event that leads to an adjustment of the Exercise Price,
the
Holders are entitled to receive a number of Exercise Shares based upon the
new
Exercise Price, as adjusted, for exercises occurring on or after the date of
such adjustment, regardless of whether a Holder accurately refers to the
adjusted Exercise Price in the Notice of Exercise.
(m) Notice
to Holder.
(i)
Adjustment
to Exercise Price.
Whenever
the Exercise Price is adjusted pursuant to any provision of this Section 5,
the
Company shall promptly mail to the Holder a notice setting forth the Exercise
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues Prohibited Equity Securities
(as defined in the Purchase Agreement), despite the prohibition thereon in
the
Purchase Agreement, the Company shall be deemed to have issued Common Stock
or
Common Stock Equivalents at the lowest possible conversion or exercise price
at
which such securities may be converted or exercised.
(ii)
Notice
to Allow Exercise by Holder.
If (A)
the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants
to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be required
in
connection with any reclassification of the Common Stock, any consolidation
or
merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property;
(E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company; then, in each case,
the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least 20 calendar days
prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not
to
be taken, the date as of which the holders of the Common Stock of record to
be
entitled to such dividend, distributions, redemption, rights or warrants are
to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date of the event
triggering such notice.
14
(n) (Omitted).
6. Fractional
Interests.
No
fractional shares or scrip representing fractional shares shall be issuable
upon
the Exercise of this Warrant, but on Exercise of this Warrant, Holder may
purchase only a whole number of shares of Common Stock. If, on Exercise of
this
Warrant, Holder would be entitled to 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 of Common Stock issuable upon Exercise
shall be the next closest number of whole shares.
7. Reservation
of Shares.
From
and
after the date hereof, the Company shall at all times reserve for issuance
such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price in full without
regard to any Beneficial Ownership Limitation. If at any time the number of
shares of Common Stock authorized and reserved for issuance is below the number
of shares sufficient for the Exercise of this Warrant (a “Share
Authorization Failure”)(based
on the Exercise Price in effect from time to time), the Company will use
commercially reasonable efforts to authorize and reserve a sufficient number
of
shares, including, without limitation, calling a special meeting of stockholders
to authorize additional shares to meet the Company’s obligations under this
Section 7, in the case of an insufficient number of authorized shares, and
using its commercially reasonable efforts to obtain stockholder approval of
an
increase in such authorized number of shares. The Company covenants and agrees
that upon the Exercise of this Warrant, all shares of Common Stock issuable
upon
such Exercise shall be duly and validly issued, fully paid, nonassessable and
not subject to liens.
8. Restrictions
on Transfer.
(a) Registration
or Exemption Required. This
Warrant has been issued in a transaction exempt from the registration
requirements of the Act by virtue of Regulation D and exempt from state
registration under applicable state laws. The Warrant and the Common Stock
issuable upon the Exercise of this Warrant may not be transferred, sold or
assigned except pursuant to an effective registration statement or an exemption
to the registration requirements of the Act and applicable state
laws.
(b) Assignment.
If
Holder
can provide the Company with reasonably satisfactory evidence that the
conditions of (a) above regarding registration or exemption have been satisfied,
including an opinion of counsel satisfactory to the Company, the Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole
or
in part. Holder shall deliver a written notice to Company, substantially in
the
form of the Assignment attached hereto as Exhibit
B,
indicating the person or persons to whom the Warrant shall be assigned and
the
respective number of warrants to be assigned to each assignee. The Company
shall
effect the assignment within ten (10) days of receipt of the original Warrant
and other information required by this Section 8(b), and shall deliver to the
assignee(s) designated by Holder a Warrant or Warrants of like tenor and terms
for the appropriate number of shares.
15
9. Noncircumvention.
The
Company hereby covenants and agrees that the Company will not, by amendment
of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue
or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at
all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the Holder. Without
limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and
(ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this
Warrant.
10. Rights
Upon Major Transaction or Change of Entity Transaction.
(a) Definitions.
For
purposes hereof,
“Change
of Entity Transaction” means
(i)
a consolidation, merger, exchange of shares, recapitalization, reorganization,
business combination or other similar event, (A) following which the holders
of
Common Stock immediately preceding such consolidation, merger, combination
or
event either (1) no longer hold a majority of the shares of Common Stock of
the
Company or (2) no longer have the ability to elect the board of directors of
the
Company or (B) as a result of which shares of Common Stock shall be changed
into
(or the shares of Common Stock become entitled to receive) the same or a
different number of shares of the same or another class or classes of stock
or
securities of another entity which is not a “Reporting Issuer” under the 1934
Act.
“Sufficient
Trading Characteristics”
shall
mean that the average daily dollar trading volume of the common stock of such
entity on its primary exchange or market is equal to or in excess of $100,000
for the 90th through the 31st day prior to the public announcement of such
transaction.
“Permissible
Change of Entity Transaction” shall
mean a Change of Entity Transaction where the Successor Entity (as defined
below) (A) is a publicly traded Company whose common stock is quoted on or
listed for trading on an Eligible Market, (B) has Sufficient Trading
Characteristics (as defined below) and (C) meets the Assumption Requirements
(as
required in Section 10(b) below).
16
“Eligible
Market” means
the
over the counter Bulletin Board (“OTC-BB”), the New York Stock Exchange, Inc.,
the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select
Market or the American Stock Exchange.
“Impermissible
Change of Entity Transaction”
shall
mean a Change of Entity Transaction which does not qualify as a Permissible
Change of Entity Transaction.
“Major
Transaction” means
(i) an
Impermissible Change of Entity Transaction; and
(ii) the
sale
or transfer of all or substantially all, of the assets of the Company to another
Person or Persons in one or a series of related transactions (an “Asset
Sale”);
and
(iii) a
purchase, tender or exchange offer made to and accepted by the holders of more
than the 50% of the outstanding shares of Common Stock.
(b)
Assumption
Upon Change of Entity Transaction.
The
Company shall not, so long as any portion of this Warrant
remains
outstanding,
enter
into or be party to a Change of Entity Transaction unless any Person purchasing
the Company’s assets or Common Stock, or any successor entity resulting from
such Change of Entity Transaction (in each case, an “Successor
Entity”),
assumes (an “Assumption”)
in
writing all of the obligations of the Company under this Warrant in accordance
with the provisions of this Section 10(b) pursuant to written agreements in
form
and substance satisfactory to the Required Warrant Holders (as defined below)
and approved by the Required Warrant Holders prior to such Change of Entity
Transaction, including agreements to deliver to each holder of Warrants in
exchange for such Warrants a security of the Successor Entity evidenced by
a
written instrument substantially similar in form and substance to this Warrant,
including, without limitation, having an exercise price equal to the Exercise
Price of this Warrant, having similar exercise rights as this Warrant (including
but not limited to similar exercise price adjustment provisions), and
satisfactory to the Required Warrant Holders. Upon
the
occurrence of any Change of Entity Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Change of Entity Transaction, the provisions of this Warrant referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under the Warrant with the same effect as if such Successor Entity
had
been named as the Company herein. Upon consummation of a Change of Entity
Transaction, the Successor Entity shall deliver to the Holder confirmation
that
there shall be issued upon exercise or redemption of the Warrant at any time
after the consummation of the Change of Entity Transaction, in lieu of the
shares of Common Stock (or other securities, cash, assets or other property)
issuable upon the exercise of this Warrant prior to such Change of Entity
Transaction, such shares of common stock (or their equivalent) of the Successor
Entity, as adjusted in accordance with the provisions of this Warrant. The
provisions of this Section shall apply similarly and equally to successive
Change of Entity Transactions and shall be applied without regard to any
limitations on the conversion of the Warrant. The requirements of this Section
10(b) are referred to herein as the “Assumption
Requirements.”
17
For
purposes hereof, “Required
Warrant Holders”
shall
mean the Holders of two-thirds (2/3) of the then outstanding Warrants
(determined by the number of unexercised underlying shares).
(c) Notice
of Major Transaction; Redemption Right Upon Major Transaction.
At
least thirty (30) days prior to the consummation of a Major Transaction, but
not
prior to the public announcement of such transaction, the Company shall deliver
written notice thereof via facsimile and overnight courier to the Holder (a
“Major
Transaction Notice”),
which
notice shall specify the nature and terms of the proposed transaction and nature
of the Successor Entity (if any).
(d) Redemption
Right Upon Major Transaction.
At any
time during the period beginning after the Holder’s receipt of a Major
Transaction Notice and ending on the Trading Day immediately prior to the
consummation of such Major Transaction, the Holder may require the Company
to
redeem all or any portion of the Holder’s Warrant by delivering written notice
thereof (“Major
Transaction Redemption Notice”)
to the
Company, which Major Transaction Redemption Notice shall indicate the number
of
Warrant Shares of its Warrant (the “Redemption
Warrant Amount”)
that
the Holder is electing to be redeemed.
The
portion of this Warrant subject to redemption pursuant to this Section 10(d)
shall be redeemed by the Company in cash at a price equal to 110%,
multiplied by the number of warrant shares being redeemed, multiplied by the
difference of (i) the Market Price as of the date of such redemption, or as
of
the date that such redemption price is paid, whichever yields the higher Market
Price, minus (ii) the Exercise Price in effect at the time of payment
(the
“Major
Transaction Redemption Price”).
(e) Escrow;
Payment of Major Transaction Redemption Price.
Following the receipt of a Major Transaction Redemption Notice from the Holder,
the Company shall not effect a Major Transaction unless it shall first place,
or
shall cause the Successor Entity to place, into an escrow account with an
independent escrow agent, at least three (3) Business Days prior to the closing
date of the Major Transaction (the “Major Transaction Escrow Deadline”), an
amount equal to the Major Transaction Redemption Price. Concurrently upon
closing of any Major Transaction, the Company shall pay or shall instruct the
escrow agent to pay the Major Transaction Redemption Price to the Holder, which
payment shall constitute a Redemption Upon Major Transaction of the Preferred
Stock.
(f) Injunction.
Following the receipt of a Major Transaction Redemption Notice from the Holder,
in the event that the Company attempts to consummate a Major Transaction without
placing the Major Transaction Redemption Price in escrow in accordance with
subsection (e) above or without payment of the Major Transaction Redemption
Price to the Holder upon consummation of such Major Transaction, the Buyer
shall
have the right to apply for an injunction in any state or federal courts sitting
in the City of New York, borough of Manhattan to prevent the closing of such
Major Transaction until the Major Transaction Redemption Price is paid to the
Holder, in full.
18
(g) Mechanics
of Redemptions Upon Major Transactions.
Redemptions
required by this Section 10 shall be made in accordance with the provisions
of
Section 12. Notwithstanding anything to the contrary in this Section 10, until
the Major Transaction Redemption Price is paid in full, the portion of the
Warrant submitted for redemption under this Section may be converted, in whole
or in part, by the Holder into shares of Common Stock, or in the event the
Conversion Date is after the consummation of a Major Transaction, into shares
of
common stock (or their equivalent) of the Successor Entity pursuant to Section
10(b). Unless otherwise indicated by the Holder in the applicable Notice of
Exercise, any amount of this Warrant exercised during the period from the date
of the Major Transaction Redemption Notice until the date the Major Transaction
Redemption Price is paid in full shall be considered to be an exercise (instead
of a Redemption) of a portion of the Warrant that would have been subject to
such Redemption, and any amounts of this Warrant exercised from time to time
during such period shall exercised in full into Common Stock at the Exercise
Price then in effect, and the number of shares of this Warrant so exercised
into
Common Stock shall be deducted from the number of Warrants that are subject
to
redemption hereunder. The parties hereto agree that in the event of the
Company’s redemption of any portion of the Warrant under this Section 10(d), the
Holder’s damages would be uncertain and difficult to estimate because of the
parties’ inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Holder.
11. Default
and Redemption.
(a)
Events Of Default.
Each of
the following events which occur between the Date of Issuance and the fourth
(4th)
anniversary thereof, shall be considered to be an “Event
Of Default,”
unless
waived by the Holder:
(i)
Failure
To File and Maintain Registration.
An Event
of Default occurs under Section 13(c) with respect to any Warrant Shares (a
“Registration
Default”)
of the
Certificate of Designation;
(ii)
Failure
To Authorize And Reserve Common Stock. An
Event
of Default occurs under Section 13(i) with respect to any Warrant Shares (a
“Share
Reservation Default”)
of the
Certificate of Designation;
(iii)
Failure
To Deliver Common Stock.
A
Warrant Share Delivery Failure (as defined above) occurs and remains uncured
for
a period of more than twenty (20) days.
(iv)
Legend
Removal Failure. A
Legend
Removal Failure occurs and remains uncured for a period of twenty (20) days,
where a “Legend Removal Failure” shall be deemed to have occurred if the Company
fails to issue Exercise Shares without a restrictive legend, when and as
required under Section 2(g)(ii) hereof.
19
(v)
(Omitted)
(vi)
Corporate
Existence; Major Transaction.
The
Company has effected a Major Transaction without paying the Major Transaction
Redemption Price to the Holder pursuant to Section 10(d) or, if the Holder
did
not elect a Redemption Upon Major Transaction, the Company has failed to meet
the Assumption Requirements of Section 10(b) prior to effecting a Major
Transaction.
(vii) Failure
to Adjust Exercise Price; Failure to Comply With Dispute Resolution
Procedures.
The
Company shall have failed to use commercially reasonable efforts to comply
in
good faith with the Dispute Resolution Procedures (as defined herein) or shall
have failed to adjust the Exercise Price as required under Section 5(l)
following a Dilutive Issuance, a Milestone Event, or otherwise (after any
applicable Dispute Resolution Procedure required herein), and such failure
continues for ten (10) Business Days after the Holder provides written notice
to
the Company that such performance by the Company is past due.
(b) Mandatory
Redemption; Certain Adjustments on Default.
(i)
Mandatory
Redemption Amount.
If any
Events of Default shall occur and any such Event of Default continues for an
additional ten (10) Business Days after the Holder provides written notice
to
the Company that an Event of Default has occurred and specifying the factual
basis therefor then thereafter, unless waived by the Holder, during the
continuation of any Event of Default, at the option of the Holder, such option
exercisable through the delivery of written notice to the Company by such Holder
(the “Default
Notice”),
the
outstanding amount of this Warrant shall be immediately redeemed by the Company
and the Company shall pay to the Holder (a “Mandatory
Redemption”)
an
amount (the “Mandatory
Redemption Amount”
or the
“Default
Amount”)
equal
to 110%, multiplied by the number of warrant shares being redeemed, multiplied
by the difference of (i) the Market Price as of the date of such redemption,
or
as of the date that such redemption price is paid, whichever yields the higher
Market Price, minus (ii) the Exercise Price in effect at the time of payment
The
Mandatory Redemption Amount shall be payable, in cash or cash equivalent, within
five (5) business days of the Date of the applicable Default Notice.
If
the
Company fails to pay the Default Amount within sixty (60) days of written notice
that such amount is due and payable (the “Default
Amount Due Date”),
then
the Holder shall have the right at any time, so long as the Company remains
in
default (and so long and to the extent that there are sufficient authorized
shares), to require the Company, upon written notice (“Default
Exercise Notice”)
(which
may be given one or more times, from time to time anytime after the Default
Amount Due Date), to immediately issue (a “Default
Exercise”),
in
lieu of all or any specified portion (the “Specified
Portion”)
of the
unpaid portion (the “Unpaid
Portion”)
of the
Default Amount, a number (the “Default
Share Amount”)
of
shares (the “Default
Shares”)
of
Common Stock, subject to the Beneficial Ownership Limitation, equal to the
Specified Portion of the Default Amount divided by the Exercise
Price
in
effect on the date such shares are issued to the Holder, PROVIDED THAT, the
Holder may require that such payment of shares be made in one or more
installments at such time and in such amounts as Holder chooses. The Default
shares are due within five (5) Business Days of the date that the Holder
delivers a Default Exercise Notice to the Company with the original Warrant
(the
“Default
Share Delivery Deadline”).
The
parties expressly agree and understand that, if an Event of Default results
from
the Company’s failure to pay any amounts when due hereunder and such failure
occurs because funds are legally unavailable for such payment pursuant to a
Payment Restriction Law (as defined below), the Company shall not be required
to
pay the Default Amount in cash, provided that in such event the Holder shall
be
entitled to all other remedies which would be available upon an Event of
Default, including but not limited to the following: the Exercise Price shall
be
subject to Default Adjustments as described above.
20
Upon
a
Default Exercise occurring after the Shareholder Issuance Approval Deadline
(as
defined in the Securities Purchase Agreement), the Company shall be required
deliver a number of Common Shares to the Holder equal to the applicable Default
Share Amount (as described above), up to any Exchange
Cap Limitations (as defined below).
For
purposes hereof,
“Payment
Restriction Law”
shall
mean any applicable state law that prohibits the Company from paying all amounts
due hereunder and under the Transaction Documents, including but not limited
to
any state law that prohibits the Company from paying certain dividends,
redemption amounts, or other payments unless such payments are made out
surplus.
“Exchange
Cap Limitations”
shall
mean any prohibitions under the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or any of its securities on the Company’s ability
to issue shares of Common Stock in excess of the number of shares which may
be
issued without violating such rules and regulations (such number of shares
shall
be referred to as the “Exchange
Cap Amount”).
If
the
Company is unable to redeem all of the Warrants submitted for redemption, the
Company shall redeem a pro rata amount from each Holder based on the number
of
Warrants submitted for redemption by such Holder relative to the total number
of
Warrants submitted for redemption by all Holders.
The
Holder shall not be entitled to receive Default Shares on a given date if and
to
the extent that such issuance would cause the Beneficial Ownership Limitation
then in effect to be exceeded. If and to the extent that the issuance of Default
Shares with respect to a given Specified Portion would result in the a violation
of the Beneficial Ownership Limitation, then that particular Specified Portion
shall be automatically reduced to a value that would cause the number of Default
Shares to be issued to equal the Maximum Percentage, and the amount of such
reduction shall be added back to the Unpaid Portion of the Default
Amount.
(ii)
Adjustment Upon Certain Events of Default.
If any
Event of Default occurs under Section 11(a)(i), (ii), (iii), (iv) or (vii),
and
any such Event of Default continues for an additional ten (10) Business Days
after the Holder provides written notice to the Company that an Event of Default
has occurred and specifying the factual basis therefor, the Exercise Price
shall
be permanently decreased (but not increased) on the first Trading Day of each
calendar month thereafter (each a “Default
Adjustment Date”)
until
the Default Amount is paid in full, to a price equal to the lesser of (i) the
Exercise Price then in effect, or (ii) the lowest Market Price that has occurred
on any Default Adjustment Date since the date that the Event of Default began.
21
(c) Redemption
by Other Holders.
Upon the
Company’s receipt of notice from any of the holders for redemption or repayment
of other Warrants that were issued pursuant to the Securities Purchase Agreement
(the “Other
Warrants”)
as a
result of an event or occurrence of an Event of Default or a Major Transaction
(each, an “Other
Redemption Notice”),
the
Company shall immediately, but no later than five (5) Business Days of its
receipt thereof, forward to the Holder by facsimile a copy of such notice.
If
the Company receives a Redemption Notice and one or more Other Redemption
Notices, during the seven (7) Business Day period beginning on and including
the
date which is three (3) Business Days prior to the Company’s receipt of the
Holder’s Redemption Notice and ending on and including the date which is three
(3) Business Days after the Company’s receipt of the Holder’s Redemption Notice
and the Company is unable to redeem all amounts designated in such Redemption
Notice and such Other Redemption Notices received during such seven (7) Business
Day period, then the Company shall redeem a pro rata amount from each holder
of
the Warrants (including the Holder) based on the number of Warrants submitted
for redemption pursuant to such Redemption Notice and such Other Redemption
Notices received by the Company during such seven (7) Business Day
period.
(d) Posting
Of Bond. In
the
event that any Event of Default occurs hereunder or any Event of Default occurs
under any of the Transaction Documents, the Company may not raise as a legal
defense (in any Lawsuit, as defined below, or otherwise) or justification to
such Event of Default any claim that such Holder or any one associated or
affiliated with such Holder has been engaged in any violation of law, unless
the
Company has posted a surety bond (a “Surety
Bond”)
for the
benefit of such Holder in the amount of 130% of the aggregate Surety Bond Value
(as defined below) of all of the Holder’s Preferred Stock and Warrants (the
“Bond
Amount”),
which
Surety Bond shall remain in effect until the completion of litigation of the
dispute and the proceeds of which shall be payable to such Holder to the extent
Holder obtains judgment.
For
purposes hereof, a “Lawsuit”
shall
mean any lawsuit, arbitration or other dispute resolution filed by either party
herein pertaining to any of the Transaction Documents.
“Surety
Bond Value,”
for the
Warrants shall mean 130% of the of the Black-Scholes value of the remaining
unexercised portion of this Warrant on the Trading Day immediately preceding
the
date that such bond goes into effect) and “Surety
Bond Value”
for the
Preferred Stock shall have the meaning ascribed to it in the Certificate of
Designation. For
purposes hereof, the “Black-Scholes”
value of
a Warrant shall be determined by use of the Black Scholes Option Pricing Model
reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury
rate
for a period equal to the remaining term of this Warrant as of such date of
request and (B) an expected volatility equal to the greater of 100% and the
100
day volatility obtained from the HVT function on Bloomberg.
22
(e)
Injunction And Posting Of Bond.
In the
event that the Event of Default referred to in subsection (c) above pertains
to
the Company’s failure to deliver unlegended shares of Common Stock to the Holder
pursuant to a Warrant Exercise, legend removal request, the Company may not
refuse such unlegended share delivery based on any claim that such Holder or
any
one associated or affiliated with such Holder has been engaged in any violation
of law, unless an injunction from a court, on prior notice to Holder,
restraining and or enjoining Exercise of all or part of said Warrant shall
have
been sought and obtained by the Company and the Company has posted a Surety
Bond
for the benefit of such Holder in the amount of the Bond Amount (as described
above), which Surety Bond shall remain in effect until the completion of
litigation of the dispute and the proceeds of which shall be payable to such
Holder to the extent Holder obtains judgment.
(f)
(Omitted).
12. Holder’s
Redemptions.
(a)
Mechanics of Holder’s Redemptions.
In the
event that the Holder has sent a Major Transaction Redemption Notice to the
Company pursuant to Section 10(d) or a Default Notice pursuant to Section
11(b)(i), respectively (each, a “Redemption
Notice”),
the
Holder shall promptly submit this Warrant to the Company. In the event of a
redemption of less than all of the outstanding portion of this Warrant, the
Company shall promptly cause to be issued and delivered to the Holder a new
Warrant representing the outstanding number of underlying Warrant Shares which
have not been redeemed. In the event that the Company does not pay the
applicable Redemption Price to the Holder within the time period required,
at
any time thereafter and until the Company pays such unpaid Redemption Price
in
full, the Holder shall have the option, in lieu of redemption, to require the
Company to promptly return to the Holder all or any portion of this Warrant
that
was submitted for redemption and for which the applicable Major Transaction
Redemption Price (together with any late charges thereon) has not been paid.
Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice
shall be null and void with respect to such Redemption Share Amount, (y) the
Company shall immediately return this Warrant, or issue a new Warrant to the
Holder representing the portion of this Warrant that was submitted for
redemption The Holder’s delivery of a notice voiding a Redemption Notice and
exercise of its rights following such notice shall not affect the Company’s
obligations to make any payments of Failure Payments which have accrued prior
to
the date of such notice with respect to the Warrant subject to such
notice.
(b)
Warrants Detachable.
The
Warrants constitute a separate, detachable security from the Preferred Stock.
In
the event of any redemption of the Preferred Stock, in whole or in part, by
the
Company, the Holder shall retain any of its Warrants that have not been
exercised or redeemed in accordance with their terms and in the event of any
redemption of the Warrants, in whole or in part, by the Company, the Holder
shall retain any of its Warrants that have not been exercised or redeemed in
accordance with their terms.
23
13. Partial
Return of Warrants Upon Approval Failure Redemption.
In the
event that the initial Approval Failure Redemption (as defined in the
Certificate
of Designation)
of the
Preferred Stock is completed within ten (10) Business Days after the Shareholder
Issuance Approval Deadline (as defined in the Securities Purchase Agreement),
the Holder shall return to the Company for cancellation a pro-rata number of
its
Warrants (equally distributed between the two Warrant Exercise Prices) based
upon the Warrant Amount (as defined in the Securities Purchase Agreement)
corresponding to the number of shares of Preferred Stock being redeemed in
such
Approval Failure Redemption. It is expressly agreed and understood that the
Holder shall not be required to tender or return any Warrants in connection
with
an Exchange Cap Redemption (as defined in the Certificate of Designation) of
the
Preferred Stock, other than the initial Approval Failure Redemption, and the
Company shall not be entitled to redeem any of the Warrants in connection with
any Exchange Cap Redemption of the Preferred Stock.
14. Remedies,
Other Obligations, Breaches And Injunctive Relief.
The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and the other Transaction Documents,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder
right
to pursue actual damages for any failure by the Company to comply with the
terms
of this Warrant. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at
law
for any such breach may be inadequate. The Company therefore agrees that, in
the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
15. Benefits
of this Warrant.
Nothing
in this Warrant shall be construed to confer upon any person other than the
Company and Holder any legal or equitable right, remedy or claim under this
Warrant and this Warrant shall be for the sole and exclusive benefit of the
Company and Holder.
16. Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement (whether brought against a party
hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits
to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding
is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of this Agreement,
then the prevailing party in such action or proceeding shall be reimbursed
by
the other party for its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of such action
or
proceeding.
24
17. Loss
of Warrant.
Upon
receipt by the Company of evidence of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction) of indemnity
or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
18. Notice
or Demands.
Notices
or demands pursuant to this Warrant to be given or made by Holder to or on
the
Company shall be sufficiently given or made if sent by certified or registered
mail, return receipt requested, postage prepaid, and addressed, until another
address is designated in writing by the Company, to the address set forth in
Section 2(a) above. Notices or demands pursuant to this Warrant to be given
or
made by the Company to or on Holder shall be sufficiently given or made if
sent
by certified or registered mail, return receipt requested, postage prepaid,
and
addressed, to the address of Holder set forth in the Company’s records, until
another address is designated in writing by Holder.
19. Warrant
Holder Not a Stockholder.
The
Holder of this Warrant, as such, shall not be entitled by reason of this Warrant
to any rights whatsoever as a stockholder of the Company, including but not
limited to voting rights.
25
IN
WITNESS WHEREOF, the undersigned has executed this Warrant as of the
13th
day of
September, 2007.
| VirtualScopics, Inc. | ||
| |
|
|
| By: | ||
|
Print
Name: Xxxxx Xxxxxxxxx
|
||
|
Title:
Chief Financial Officer
|
||
26
EXHIBIT
A
NOTICE
OF
EXERCISE FORM FOR WARRANT
The
undersigned hereby irrevocably Exercises the right to purchase ____________
of
the shares of Common Stock (the “Common
Stock”)
of
VIRTUALSCOPICS,
INC.,
a
Delaware corporation (the “Company”),
evidenced by the attached warrant (the “Warrant”),
and
herewith makes payment of the Exercise price with respect to such shares in
full, all in accordance with the conditions and provisions of said
Warrant.
1.
The
undersigned agrees not to offer, sell, transfer or otherwise dispose of any
of
the Common Stock obtained on Exercise of the Warrant, except in accordance
with
the provisions of Section 8(a) of the Warrant.
2.
The
undersigned requests that stock certificates for such shares be issued free
of
any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of
the
undersigned and delivered to the undersigned at the address set forth
below:
Dated:________
Signature
Print
Name
Address
NOTICE
The
signature to the foregoing Notice of Exercise Form must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
27
EXHIBIT
B
ASSIGNMENT
(To
be
executed by the registered holder
desiring
to transfer the Warrant)
FOR
VALUE
RECEIVED, the undersigned holder of the attached warrant (the “Warrant”)
hereby
sells, assigns and transfers unto the person or persons below named the right
to
purchase _______ shares of the Common Stock of VIRTUALSCOPICS,
INC.,
a
Delaware corporation, evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint _______________________ attorney to transfer
the said Warrant on the books of the Company, with full power of substitution
in
the premises.
| Dated: _________ |
|
|
|
|
Fill
in
for new registration of Warrant:
___________________________________
Name
___________________________________
Address
___________________________________
Please
print name and address of assignee
(including
zip code number)
NOTICE
The
signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration
or
enlargement or any change whatsoever.
28
SCHEDULE
5(g)
MILESTONES
|
Milestone
Date
|
Milestone
Goals
|
|
|
December
31, 2007
|
$5,000,000
in Revenues for the 12 month period ending on the Milestone
Date
|
|
|
December
31, 2008
|
$7,000,000
in Revenues for the 12 month period ending on the Milestone Date
and
negative (loss) Consolidated EBITDA of not greater than
$3,800,000
|
For
purposes of the above, the following definitions shall apply:
“Consolidated
EBITDA”
means,
with respect to any Person for any period, the Consolidated Net Income of such
Person and its Subsidiaries for such period, plus (i) without duplication,
the
sum of the following amounts of such Person and its Subsidiaries for such period
and to the extent deducted in determining Consolidated Net Income of such Person
for such period: (A) Consolidated Net Interest Expense, (B) income tax expense,
(C) depreciation expense, (D) amortization expense, (E) stock compensation
expense, (F) all rental expense determined on a consolidated basis in accordance
with GAAP, less cash rents due under operating lease obligations, minus (ii)
the
aggregate amount of cash lease payments paid or payable during such period
in
respect of the capitalized leases.
“Consolidated
Net Income”
means,
with respect to any Person for any period, the net income (loss) of such Person
and its Subsidiaries for such period, determined on a consolidated basis and
in
accordance with GAAP, but excluding from the determination of Consolidated
Net
Income (without duplication) (a) any extraordinary or non recurring gains or
losses or gains or losses from dispositions, (b) restructuring charges, (c)
any
tax refunds, net operating losses or other net tax benefits and (d) effects
of
discontinued operations.
“Consolidated
Net Interest Expense”
means,
with respect to any Person, for any period, gross interest expense of such
Person and its Subsidiaries for such period determined on a consolidated basis
and in accordance with GAAP (excluding the interest component of any capitalized
lease obligations), less interest income determined on a consolidated basis
and
in accordance with GAAP.
29
