1
EXHIBIT 10.11
[EXECUTION COPY]
XXXXXX PAYMENT LETTER
September 30, 1999
Northstar Health Services, Inc.
The Atrium
000 Xxxxxxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, Xxxxxxxxxxxx 00000
Cerberus Capital Management, LLC,
as agent for the Lenders
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxx-Xxxxxx
Northstar Health Services, Inc.
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement (the "Credit Agreement"), dated as of September 30, 1999, among
Northstar Health Services, Inc. (the "Company"), the Subsidiary Guarantors party
thereto, the Lenders listed therein (the "Lenders"), Cerberus Capital
Management, LLC (the "Agent") and The Chase Manhattan Bank as collateral agent.
Capitalized terms used but not defined herein have the meanings given to them in
the Credit Agreement.
Pursuant to Section 2.4B(ii)(e)(i)(II) of the Credit Agreement, in the
event that certain conditions are satisfied, the Company is permitted to retain
up to $52,500 of Consolidated Excess Cash Flow per month.
Xx. Xxxxxx X. Xxxxxx ("Xxxxxx") and the Company agree that, for so
long as (a) the Company is entitled to retain amounts under Section
2.4B(ii)(e)(i)(II) and (b) any of the creditors set forth on Schedule I (the
"Xxxxxx Creditors") are owed any amounts by Xxxxxx, then the Company shall
allocate the monthly amount so available to the Company among the Xxxxxx
Creditors, and distribute the amounts for each such Xxxxxx Creditor set forth on
Schedule I under the heading "Monthly Payment Amount"; provided, however, that
in the event that the amount allocated by the Company for such month is
insufficient to make the monthly payment to the Xxxxxx Creditors in full, such
amount shall be distributed pro rata among the Xxxxxx Creditors.
2
In the event that at any time the Payment Conditions set forth in
Section 2.4B(ii)(e)(i)(II) shall not be satisfied, the Company shall immediately
stop all such payments to the Xxxxxx Creditors and Xxxxxx shall not be entitled
to direct that any further payments be made until such Payment Conditions have
been remedied and satisfied.
In addition, the Company and Xxxxxx hereby acknowledge and agree, for
the benefit of the Agent and the Lenders, as follows:
1. The outstanding amount owed by Xxxxxx to each of the Xxxxxx
Creditors is the amount set forth opposite such Xxxxxx Creditor's name
on Schedule I under the heading "Total Amount Owed" (collectively, such
amounts being the "Xxxxxx Obligations").
2. Xxxxxx, and not the Company, is solely responsible for the
repayment of the Xxxxxx Obligations. Payments made by the Company
directly to the Xxxxxx Creditors were reimbursement payments to Xxxxxx
which he requested be paid directly to the Xxxxxx Creditors. To the
extent the Company has paid, and may in the future pay, reimbursement
payments directly to the Xxxxxx Creditors, such payments shall not
imply or impose any liability or obligation on the Company of any kind,
including without limitation, (a) to continue making any payments to
the Xxxxxx Creditors, or (b) to repay the Xxxxxx Obligations.
3. The obligation of the Company to reimburse Xxxxxx for his
expenses is expressly subordinate to, and junior in right of payment
to, any and all amounts owed by the Company to the Lenders under the
Credit Agreement and is expressly subject to the Xxxxxx Subordination
Agreement.
Each of the parties represents to each of the others that:
(a) It has full power and authority to enter into the
performance of this letter agreement, and this letter agreement (i) has
been duly authorized, (ii) is legal, valid and binding and enforceable
against such party, and (iii) is not in contravention of any law, order
or agreement by which such party is bound; and
(b) No consents, notices, filings, approvals or authorizations
are required to be made to or with or received from any person, entity,
or governmental body for the consummation of the transactions
contemplated by this letter agreement.
Please acknowledge your acceptance of these terms by executing this
letter agreement in the appropriate space provided below.
This Agreement may not be amended and no terms hereof waived without
the express written consent of the three parties hereto.
-2-
3
This letter agreement shall be governed by the laws of the State of New
York and may be executed in counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same instrument.
___________________________
Xxxxxx Xxxxxx
ACKNOWLEDGED AND AGREED:
NORTHSTAR HEALTH SERVICES, INC.
By:__________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, LLC,
as agent for the lenders
By:__________________________________
Name:
Title:
-3-
4
SCHEDULE I
to
XXXXXX PAYMENT LETTER
Xxxxxx Creditors
----------------
Xxxxxx Creditor Monthly Payment Amount Total Amount Owed
--------------- ---------------------- -----------------
Xxxxxxx Xxxx & Xxxxxxxxx $18,600 $500,239
Xxxxxx Xxxxxxx $ 6,400 $172,600
Commonwealth Associates $ 2,500 $ 49,500
----------------------- -------- --------
Total: $27,500 $722,339
-4-
5
[EXECUTION COPY]
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER ANY STATE
SECURITIES LAWS AND SUCH WARRANTS HAVE BEEN ISSUED TO THE HOLDER IN RELIANCE
UPON CERTAIN EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE 1933
ACT AND THE RULES AND REGULATIONS THERETO AND THE APPLICABLE STATE SECURITIES
LAWS. ACCORDINGLY, NEITHER SUCH SECURITIES OR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE 1933 ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED, OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.
Warrant No.: W-1 As of September 30, 1999
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
NORTHSTAR HEALTH SERVICES, INC.
THIS CERTIFIES THAT, for value received, CERBERUS CAPITAL MANAGEMENT
LLC, as Agent for the Lenders under the Credit Agreement referred to below, or
its assignee together with any transferee (the "Holder"), is entitled, in
accordance with the terms and conditions hereinafter set forth, to subscribe for
and purchase from Northstar Health Services, Inc., a Delaware corporation (the
"Company"), at any time after the date of this Warrant and on or prior to 5:00
p.m. New York City time on January 1, 2003 (the "Expiration Date"), up to
240,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock") (such number of shares as from time to time adjusted as
hereinafter provided, the "Warrant Shares"), at the price of $.25 per share
(such price as from time to time adjusted as hereinafter provided, the "Exercise
Price") and to receive a certificate or certificates for the Warrant Shares so
purchased, upon presentation and surrender of this Warrant at the location set
forth in Section 1(a) below, together with the Exercise Price of the shares so
purchased. For purposes of this Warrant, the term "Credit Agreement" means that
certain Amended and Restated Credit Agreement, dated as of September 30, 1999,
among the Company, the Subsidiary Guarantors party thereto, the Lenders listed
therein, Cerberus Capital Management, LLC, as Agent and The Chase Manhattan
Bank, as Collateral Agent.
6
Section 1. Exercise.
(a) Method of Exercise. Subject to compliance with all applicable
securities laws, this Warrant may be exercised from time to time in whole or in
part on or prior to the Expiration Date, by delivering to the Company at The
Atrium, 665 Philadelphia Street, X.X. Xxx 0000, Xxxxxxx, Xxxxxxxxxxxx 00000 (i)
this Warrant, (ii) a subscription form, substantially in the form of Exhibit A
attached hereto (the "Subscription Form") duly completed and executed by the
Holder and (iii) payment of the Exercise Price as set forth below in Section
1(b).
(b) Payment of Exercise Price. Payment of the Exercise Price may be
made, at the option of the Holder, either (i) by payment to the Company, by
check or wire transfer of an amount in immediately available funds equal to the
product of (A) the then applicable Exercise Price, multiplied by (B) the number
of Warrant Shares then being purchased, or (ii) by surrender of the right to
receive upon exercise of this Warrant a number of shares of Common Stock having
a value (as determined below) equal to the product of (A) the then applicable
Exercise Price, multiplied by (B) the number of Warrant Shares then being
purchased, in which case, the number of Warrant Shares to be issued to the
Holder upon such exercise shall be calculated using the following formula:
Y * (A - B)
-----------
X = A
with X = the number of shares of Common Stock to be issued
to the Holder
Y = the number of Warrant Shares with respect to which
the Warrant is being exercised
A = the Fair Market Value (as determined below) of one
share of Common Stock
B = the then applicable Exercise Price of the Warrant.
For purposes of this Warrant, the term "Fair Market Value" shall mean
the average of the daily Closing Prices (as hereinafter defined) for the 10
consecutive Trading Days (as hereinafter defined) immediately prior to the date
in question. "Closing Price" on any day means the last sales price, regular way,
per share of such stock on such day, or if no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of such stock are listed or admitted to
trading, or, if the shares of such stock are not listed or admitted to trading
on any national securities exchange, the average of the high bid and low asked
prices in the over-the-counter market as reported by the National Association of
Securities Dealers Inc.'s Automated Quotation System. "Trading Day" means a day
on which the principal national securities exchange on which such
-2-
7
shares of such stock are listed or admitted to trading is open for the
transaction of business or, if the shares of such stock are not listed or
admitted to trading on any national securities exchange, a Monday, Tuesday,
Wednesday, Thursday or Friday on which banking institutions in the Borough of
Manhattan, City and State of New York, are not authorized or obligated by law or
executive order to close.
(c) Date of Exercise. This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided in Section 1(a) above, and the person
entitled to receive the Warrant Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Warrant Shares as of
the close of business on such date.
(d) Issuance of Certificates for Warrant Shares; No Fractional Shares.
As soon as practicable after the Company's receipt of the Warrant surrendered in
connection with an exercise provided for in Section 1(a) above, the Company
shall issue and deliver to the person or persons entitled to receive the Warrant
Shares issuable upon such exercise of the Warrant, a certificate or certificates
for the number of whole shares of Warrant Shares issuable upon such exercise,
together with cash in lieu of any fraction of a share equal to such fraction of
the current fair market value of one whole share of Common Stock as of the date
of exercise, as determined in good faith by the Board of Directors of the
Company. No fractional shares shall be issued upon the exercise of this Warrant,
and any fractions shall be rounded down to the nearest whole number of shares.
(e) Partial Exercise. Upon a partial exercise of this Warrant, this
Warrant shall be surrendered by the Holder and replaced with a new Warrant of
like tenor in the name of the Holder providing for the right to purchase the
number of shares of Common Stock as to which this Warrant has not then been
exercised.
(f) Taxes. The issuance of certificates for shares of Common Stock upon
the exercise of this Warrant will be made without charge by the Company to the
Holder for any issue tax (other than applicable income tax).
Section 2. Adjustment of Exercise Price and Number of Warrant Shares.
The Exercise Price and the number of Warrant Shares shall each be subject to
adjustment from time to time as set forth below.
(a) Dividends and Distributions. In the event the Company shall, at any
time or from time to time, distribute to the holders of any of its Common Stock
any dividend or other distribution of any Assets, other than dividends payable
in Common Stock, Options or Convertible Securities, and any cash dividend that,
when added to all other cash dividends paid in the 12 months immediately
preceding the declaration date of such dividend (excluding any such other
dividend included in a previous adjustment of the Exercise Price pursuant to
this paragraph (a)), does not exceed 2% (on an annualized basis) of the Current
Market Price per share of Common Stock on such declaration date, then:
-3-
8
(i) the Exercise Price shall be reduced to equal the product
obtained by multiplying (A) the Exercise Price then in effect by (B) a
fraction, (x) the numerator of which shall be (I) the Current Market
Price per share of Common Stock on the record date for such
distribution less (II) the sum of (a) the cash portion, if any, of such
distribution per share of Common Stock outstanding (exclusive of any
treasury shares) on the record date for such distribution plus (b) the
then fair market value (as determined in good faith by the Board of
Directors of the Company) per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such
distribution of that portion, if any, of such distribution consisting
of Assets other than cash, and (y) the denominator of which shall be
such Current Market Price per share of Common Stock on the record date
for such distribution, and
(ii) the number of Warrant Shares shall be increased to equal
the product obtained by multiplying (A) the Exercise Price in effect
immediately prior to the record date for such distribution by (B) a
fraction, (x) the numerator of which shall be the Exercise Price in
effect immediately prior to the adjustment required by clause (i) of
this paragraph and (y) the denominator of which shall be the Exercise
Price in effect immediately after such adjustment.
The adjustments required by this paragraph (a) shall be made whenever
any such distribution is made and shall be retroactive to the record date for
the determination of stockholders entitled to receive such distribution.
(b) Dividends Payable in Common Stock and Changes in Common Stock. In
the event the Company shall, at any time or from time to time, (x) issue any
shares of Common Stock as a stock dividend to the holders of Common Stock or (y)
subdivide or combine any outstanding shares of Common Stock into a greater or
lesser number of shares (each such event being a "Change of Shares"), then:
(i) the number of Warrant Shares immediately prior to such
action shall be adjusted so that the Holder, upon exercising the
Warrant shall be entitled to the number of shares of Common Stock that
the Holder would have owned or have been entitled to receive after the
happening of such event had the Warrant been exercised immediately
prior to the record date (or, if there is no record date, the effective
date) for such event, and
(ii) the Exercise Price shall be adjusted to equal the product
determined by multiplying (A) the Exercise Price in effect immediately
prior to such event by (B) a fraction, (x) the numerator of which shall
be the number of Warrant Shares immediately prior to such event and (y)
the denominator of which shall be the number of Warrant Shares after
the adjustment referred to above.
An adjustment made pursuant to this clause (b) shall become effective
retroactively immediately after the record date in the case of a dividend and
shall become effective
-4-
9
immediately after the effective date in other cases, but any shares of Common
Stock issuable solely as a result of such adjustment shall not be issued prior
to the effective date of such event.
(c) Common Stock Issuances. In the event the Company shall, at any time
or from time to time, issue, sell or otherwise distribute (including by way of
deemed distributions pursuant to paragraphs (e) and (f) below) any shares of
Common Stock (other than pursuant to a Change of Shares or the exercise of any
Option or Convertible Security) (any such event, including any deemed
distributions described in paragraphs (e) and (f) below, being herein called a
"Common Stock Distribution"), for a consideration per share less than either (x)
the Current Market Price per share of Common Stock on the date of such Common
Stock Distribution or (y) the Exercise Price in effect at the time of such
distribution, then, effective upon such Common Stock Distribution:
(i) the Exercise Price shall be reduced to equal the product
obtained by multiplying (A) the Exercise Price in effect immediately
prior to such Common Stock Distribution by (B) a fraction, (x) the
numerator of which shall be the sum of the number of shares of Common
Stock outstanding (exclusive of any treasury shares) immediately prior
to such Common Stock Distribution plus the number of shares of Common
Stock which the aggregate consideration received by the Company would
purchase at the greater of (I) the Exercise Price in effect immediately
prior to such Common Stock Distribution and (II) the Current Market
Price per share of Common Stock and (y) the denominator of which shall
be the total number of shares of Common Stock outstanding (exclusive of
any treasury shares) immediately after such Common Stock Distribution,
and
(ii) the number of Warrant Shares shall be increased to equal
the product obtained by multiplying (A) the number of Warrant Shares in
effect immediately prior to such Common Stock Distribution by (B) a
fraction, (x) the numerator of which shall be the Exercise Price in
effect immediately prior to such adjustment and (y) the denominator of
which shall be the Exercise Price in effect immediately after such
adjustment.
The provisions of this paragraph (c) (including by operation of
paragraph (e) or (f) below) shall not operate to increase the Exercise Price or
reduce the number of Warrant Shares, except by operation of paragraph (g) below.
(d) Other Securities. In the event that (i) the Company shall, at any
time or from time to time, issue any shares of its capital stock in a
reclassification or reorganization of the Common Stock, or (ii) at any time, as
a result of an adjustment made pursuant to this Section 2, the Holder shall
become entitled to receive any securities of the Company other than shares of
Common Stock, thereafter, in each such case, the number of such other securities
so receivable upon exercise of the Warrant and the Exercise Price applicable to
such exercise shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the shares of Common Stock contained in this Section.
-5-
10
(e) Issuance of Options. In the event the Company shall, at any time or
from time to time, issue, sell, distribute or otherwise grant in any manner
(including by assumption) any Options, whether or not such Options (or in the
case of Options to acquire Convertible Securities, the right to convert or
exchange such Convertible Securities) are immediately exercisable, and the
Present Value of the Exercise Price Per Share with respect to such Options shall
be less than either (i) the Current Market Price per share of Common Stock on
the date of the issuance, sale, distribution or granting of such Options or (ii)
the Exercise Price then in effect, then, for purposes of paragraph (c) above,
the total maximum number of shares of Common Stock issuable upon the exercise of
all such Options or upon the conversion or exchange of the total maximum amount
of the Convertible Securities issuable upon the exercise of all such Options
shall be deemed to have been issued as of the date of the issuance, sale,
distribution or granting of such Options and thereafter shall be deemed to be
outstanding and the Company shall be deemed to have received as consideration
such Present Value of the Exercise Price Per Share, determined as provided
above, therefor.
Except as otherwise provided in paragraph (g) below, no additional
adjustment of the Exercise Price shall be made upon the actual exercise of such
Options or upon conversion or exchange of the Convertible Securities issuable
upon the exercise of such Options.
(f) Issuance of Convertible Securities. In the event the Company shall,
at any time or from time to time, issue, sell or otherwise distribute (including
by assumption) any Convertible Securities (other than upon the exercise of any
Option), whether or not the right to convert or exchange such Convertible
Securities are immediately exercisable, and the Present Value of the Exercise
Price Per Share shall be less than (i) the Current Market Price per share of
Common Stock on the date of such issuance, sale or distribution or (ii) the
Exercise Price then in effect, then, for purposes of paragraph (c) above, the
total maximum number of shares of Common Stock, issuable upon the conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
as of the date of the issuance, sale or distribution of such Convertible
Securities and thereafter shall be deemed to be outstanding and the Company
shall be deemed to have received as consideration such Present Value of the
Exercise Price Per Share, determined as provided above, therefor.
Except as otherwise provided in paragraph (g) below, no additional
adjustment of the Exercise Price shall be made upon the actual conversion or
exchange of such Convertible Securities.
(g) Changes in Options and Convertible Securities. If (i) the exercise
price provided for in any Options referred to in paragraph (e) above, (ii) the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (e) or (f) above, or (iii) the
rate at which any Convertible Securities referred to in paragraph (e) or (f)
above are convertible into or exchangeable for Common Stock, shall change at any
time (other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section), the Exercise Price then in effect and the number of Warrant Shares
shall forthwith be readjusted to the Exercise Price and the number of
-6-
11
Warrant Shares that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(h) Certain Distributions. If the Company shall pay a dividend or make
any other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (c) above (by operation of paragraph (e) or (f) above, as
the case may be), such Options or Convertible Securities shall be deemed to have
been issued or sold without consideration except for such amounts of
consideration as shall have been deemed to have been received by the Company
pursuant to paragraphs (e) or (f) above, as appropriate.
(i) Special Anti-dilution Protection For Conversion of Xxxxxx
Obligations. Notwithstanding any other provision of this Agreement, in the event
(i) all or any portion of the Xxxxxx Obligations (as defined in the Credit
Agreement) is converted into, exchanged for, redeemed or repaid with shares of
Common Stock or Convertible Securities or (ii) one or more holders of all or any
portion of the Xxxxxx Obligations receives any shares of Common Stock or
Convertible Securities with respect to all or any portion of the Xxxxxx
Obligations (any of the foregoing in clauses (i) or (ii) being a "Conversion" ),
then:
(i) the number of Warrant Shares in effect immediately
following the Conversion shall be increased to equal the product
obtained by multiplying (A) the number of Warrant Shares in effect
immediately prior to the Conversion by (B) a fraction, (x) the
numerator of which is the number of shares of Common Stock outstanding
immediately after the Conversion (calculated on a fully diluted basis,
including, without limitation, all shares of Common Stock which may be
issued pursuant to any Convertible Securities issued to the holders of
any Xxxxxx Obligations and shares of Common Stock which may be issued
upon the exercise of this Warrant), and (y) the denominator of which is
the number of shares of Common Stock outstanding immediately prior to
the Conversion (calculated on a fully diluted basis, including, without
limitation, all shares of Common Stock which may be issued upon the
exercise of this Warrant), and
(ii) the Exercise Price in effect immediately following the
Conversion shall equal the Exercise Price that was in effect
immediately prior to such Conversion.
(j) Equitable Adjustments. In case any other corporate event or
transaction of the Company, outside the ordinary course of business consistent
with past practice, not specified in this Section occurs which equitably
requires an anti-dilutive adjustment to the Warrant, the Company's Board of
Directors and the Holder shall consult with each other in good faith and
mutually agree upon appropriate adjustments to the Exercise Price and the number
of Warrant Shares, so that the property (including securities) to be received by
the Holder hereunder upon exercise of the Warrant after the effective date of
such event, shall be substantially similar, as nearly as practicable, to those
which the Holder would have been entitled immediately prior to such event had
the Holder exercised the Warrant prior to such event.
-7-
12
(k) Definitions. For purposes of this Section 2, the following
capitalized terms have the following meanings:
"Assets" means cash, evidences of indebtedness, other
securities or other properties or assets, or any options, warrants or
other rights to subscribe for or purchase any of the foregoing.
"Convertible Securities" means any stock or securities
convertible into or exchangeable for Common Stock.
"Current Market Price" per share of Common Stock at any date
shall be the Closing Price.
"Options" means any rights to subscribe for or to purchase, or
any warrants or options for the purchase of, Common Stock or any
Convertible Security.
"Present Value of the Exercise Price Per Share" with respect
to the issuance of any:
(i) Options, means the present value determined by
discounting from the last date on which such Options are
exercisable, at 9% per annum, the exercise price per share at
which Common Stock is issuable upon the exercise of such
Options or in the case of Options to acquire Convertible
Securities, upon the conversion or exchange of such
Convertible Securities (the "Option Exercise Price"). The
Option Exercise Price is determined by dividing (x) the sum of
(A) the aggregate amount, if any, received or receivable by
the Company as consideration for the issuance, sale,
distribution or granting of such Options, plus (B) the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the exercise of all such Options, plus (C)
in the case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange of all such
Convertible Securities, by (y) the total maximum number of
shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all Convertible
Securities issuable upon the exercise of all such Options, and
(ii) Convertible Securities, means the present value
determined by discounting from the last date on which such
Convertible Securities are convertible or exercisable, at 9%
per annum, the price per share at which Common Stock is
issuable upon the conversion or exchange of such Convertible
Securities (the "Convertible Securities Exercise Price"). The
Convertible Securities Exercise Price shall be determined by
dividing (x) the sum of (A) the aggregate amount, if any,
received or receivable by the Company as consideration for the
issuance, sale or distribution of such Convertible Securities,
plus (B) the
-8-
13
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of all
such Convertible Securities, by (y) the total maximum number
of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities.
(l) Miscellaneous.
(i) Deferral of Certain Adjustments. No adjustment to the Exercise
Price (including the related adjustment to the number of Warrant Shares) shall
be required hereunder unless such adjustment, together with other adjustments
carried forward as provided below, would result in an increase or decrease of at
least 1% of the Exercise Price; provided, however, that any adjustment which by
reason of this paragraph is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. No adjustment need be made for
a change in the par value of the Common Stock.
(ii) Notice of Certain Transactions. In the event that:
(A) the Company takes any action that would require an
adjustment in the Exercise Price or the number of Warrant Shares,
(B) the Company declares or distributes any dividend,
distribution, security, instrument or other rights to its stockholders
that would require an adjustment pursuant to this Section,
(C) the Company consolidates or merges with, or transfers all
or substantially all of its assets to, or makes any statutory exchange
of securities with, another corporation or engages in any
reorganization, restructuring, recapitalization, reclassification of
capital stock or spin-off or other similar transaction, or
(D) there is a dissolution or liquidation or other winding up
of the Company,
the Company shall, not later than 10 days prior to the earliest of the proposed
record or effective date, as the case may be, or any other applicable date with
respect to any of the foregoing actions or transactions (including the date, if
any is to be fixed, as of which holders of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon any such merger, consolidation, reorganization, restructuring,
recapitalization, reclassification, transfer, dissolution, liquidation or
winding up), give the Holder a written notice stating such proposed record or
effective date, as the case may be, or such other applicable date.
(iii) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the fair market value of such
consideration (as mutually agreed in good faith by the Board of Directors of the
Company and the Holder). If any Options shall be issued in connection with the
-9-
14
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been
issued, sold or distributed for such amount of consideration as shall be
allocated to such Options as mutually agreed in good faith by the Board of
Directors of the Company and the Holder.
(iv) Computation of Adjustments. Anything herein to the contrary
notwithstanding, upon each computation of an adjustment in the Exercise Price or
the number of Warrant Shares, the Exercise Price shall be computed to the
nearest cent (i.e., fractions of less than half of a cent shall be disregarded
and fractions of half of a cent, or more, shall be treated as being one cent)
and the number of Warrant Shares, shall be calculated to the nearest share
(i.e., fractions of less than half of a share shall be disregarded and fractions
of half of a share, or more, shall be treated as being one share).
(v) Certificate as to Adjustments. Upon any adjustment to the Exercise
Price or the number of Warrant Shares, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company, which notice shall
state the Exercise Price resulting from such adjustment and the increase or
decrease, if any, in the number of Warrant Shares resulting from such
adjustment, setting forth in reasonable detail the calculations and the facts
upon which such calculation is based.
Section 3. Representations and Covenants of the Company. The Company
hereby represents, warrants and covenants to and with the Holder as follows:
(a) Power. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company has the necessary
corporate power and authority, to execute and deliver this Warrant, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
(b) Binding Effect. This Warrant has been duly executed and
delivered by the Company and is the legal, valid and binding
obligations of the Company enforceable against it in accordance with
its terms.
(c) Contravention. Neither the execution, delivery and
performance of this Warrant nor the consummation of the transactions
contemplated hereby will (with or without notice or lapse of time or
both) (i) conflict with or breach any provision of the Company's
certificate of incorporation or bylaws, (ii) violate any law, rule or
regulation by which the Company or any of its properties may be bound
or affected, or (iii) conflict with or result in a default under any
material contract or other material agreement to which the Company is a
party or by which it or any of its properties may be bound or affected.
-10-
15
(d) Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by
any governmental authority or other person is required or advisable in
connection with (i) the due execution and delivery by the Company of
this Warrant, or (ii) the performance by the Company of its
obligations under this Warrant.
(e) Reservation of Shares. The Company shall reserve and keep
available out of its authorized but unissued Common Stock for issuance
upon the exercise of this Warrant, free from preemptive rights, such
number of shares of Common Stock for which this Warrant shall from time
to time be exercisable.
(f) Warrant Shares Duly Authorized, etc. All shares of Common
Stock which may be issued upon the exercise of this Warrant will, upon
issuance, be fully paid and nonassessable and be free from all taxes,
liens and charges in respect of the issuance thereof.
(g) No Impairment. The Company will not, by amendment of its
charter documents, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other
voluntary action, willfully 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 assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder under this Warrant.
(h) Regulatory Approval of Issuance. The Company further
covenants and agrees that if any shares of Common Stock to be reserved
for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental
authority under any Federal or State law before such shares may be
validly issued or delivered upon exercise of this Warrant, then the
Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be, and the right
to exercise this Warrant shall be extended until 15 days after the
completion of any such registration or approval.
(i) Listing Requirements. If and so long as any Common Stock
issuable upon the exercise of this Warrant is listed on any national
securities exchange, the Company will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of Common Stock issuable upon exercise
of this Warrant.
Section 4. Representations and Warranties of the Holder. The Holder
hereby represents and warrants to the Company as follows:
(a) Power. The Holder is a limited liability company duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The
-11-
16
Holder has the necessary power and authority, to execute and deliver
this Warrant, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) Binding Effect. This Warrant has been duly executed and
delivered by the Holder and is the legal, valid and binding obligation
of the Holder enforceable against it in accordance with its terms.
(c) Contravention. Neither the execution, delivery and
performance of this Warrant nor the consummation of the transactions
contemplated hereby will (with or without notice or lapse of time or
both) (i) conflict with or breach any provision of the Holder's
organizational documents, (ii) violate any law, rule or regulation by
which the Holder or any of its properties may be bound or affected, or
(iii) conflict with or result in a default under any material contract
or other material agreement to which the Holder is a party or by which
it or any of its properties may be bound or affected.
(d) Approvals. No authorization, consent, order or approval
of, notice to or registration or filing with, or any other action by
any governmental authority or other person is required or advisable in
connection with (i) the due execution and delivery by the Holder of
this Warrant, or (ii) the performance by the Holder of its obligations
under this Warrant.
(e) Review of Information. The Holder has carefully read and
reviewed the material furnished to it with respect to the Company and
the Warrant.
(f) No Registration Under Securities Act. The Holder
understands and acknowledges that the Warrants and the shares of Common
Stock issuable upon conversion thereof are not being registered under
the 1933 Act or any state securities laws, on the grounds that the
issuance thereof is exempt under Section 4(2) of the 1933 Act, and such
state securities laws as a transaction by an issuer not involving any
public offering, and that reliance on such exemption is predicated in
part on the representations by the Holder herein. The Holder
understands that the Warrants cannot be sold unless they are
subsequently registered under the 1933 Act and applicable state
securities laws or an exemption from such registration is available.
(g) Investment Intent. The Holder is acquiring the Warrant for
investment, solely for the Holder's own account and not with a view to,
or for resale in connection with, the distribution or other disposition
thereof.
(h) Accredited Investor. The Holder is an accredited investor,
as defined in Rule 501 of Regulation D promulgated under the 1933 Act.
-12-
17
Section 5. Registration Rights.
(a) Registrable Securities. As used herein the term "Registrable
Security" means each of the Warrants, the Warrant Shares and any shares of
Common Stock or other securities issued upon any stock split, stock dividend or
similar transaction in respect of such Warrant Shares; provided, however, that
with respect to any particular Registrable Security, such security shall cease
to be a Registrable Security when, as of the date of determination, (i) it has
been effectively registered under the 1933 Act and disposed of pursuant thereto,
(ii) registration under the 1933 Act is no longer required for the immediate
public distribution of such security or (iii) it has ceased to be outstanding.
The term "Registrable Securities" means any and/or all of the securities falling
within the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be made in
the definition of "Registrable Security" as is appropriate in order to prevent
any dilution or enlargement of the rights granted pursuant to this Section 5
pursuant to the provisions of Section 2 hereof.
(b) Piggyback Registration. (i) If, at any time during the six years
following the date of this Agreement, the Company proposes to register its
securities or any such securities of the Company held by its security holders by
filing a registration statement, or any post-effective amendment to a
registration statement filed by the Company, pursuant to the 1933 Act (in any
such case, other than pursuant to Form S-8 of the 1933 Act or any successor
form) (a "Registration Statement"), it will give written notice of its intention
to do so by registered mail ("Notice"), at least 30 business days prior to the
filing of each such Registration Statement, to all holders of the Registrable
Securities. Upon the written request of such a holder (a "Requesting Holder"),
made within 15 business days after receipt of the Notice, that the Company
include the Requesting Holder's Registrable Securities in the proposed
Registration Statement (such request to specify the number and classes of
Registrable Securities to be so included in an amount equal to no less than the
lesser of (a) 50,000 shares or (b) the Requesting Holder's total number of
Registrable Securities), the Company shall, as to each such Requesting Holder,
use its best efforts to effect the registration under the 1933 Act of the
Registrable Securities which it has been so requested to register (a "Piggyback
Registration"), at the Company's sole cost and expense; provided, however, that
if, in the written opinion of the Company's managing underwriter, if any, for
such offering the inclusion of all or a portion of the Registrable Securities
requested to be registered, when added to the securities being registered by the
Company or the selling security holders, will exceed the maximum amount of the
Company's securities which can be sold (x) at a price reasonably related to
their then current market value, or (y) without materially adversely affecting
the entire offering, then the Company may exclude from such offering all or a
portion of the Registrable Securities which it has been requested to register.
(ii) If securities are proposed to be offered for sale pursuant to such
Registration Statement by other selling security holders of the Company and the
total number of securities to be offered by the Requesting Holders and such
other selling security holders is required to be reduced pursuant to a request
from the managing underwriter (which request shall be made only for the reasons
and in the manner set forth above), the aggregate number of Registrable
Securities to be offered by Requesting Holders pursuant to such Registration
Statement shall equal the number which bears the same ratio to the maximum
number of securities that the managing
-13-
18
underwriter believes may be included for all the selling security holders
(including the Requesting Holders) as the original number of Registrable
Securities proposed to be sold by the Requesting Holders bears to the total
original number of securities proposed to be offered by the Requesting Holders
and other selling security holders.
(iii) Notwithstanding the provisions of this Section 5(b), the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 5(b) (irrespective of whether any written request for
inclusion of such securities shall have already been made) to elect not to file
any such proposed Registration Statement, or to withdraw the same after the
filing but prior to the effective date thereof. Any Requesting Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities in
any Registration Statement pursuant to this Section 5(b) by giving written
notice to the Company of its request to withdraw any time prior to the effective
date of the Registration Statement.
-14-
19
(c) Demand Registration.
(i) At any time during the five years following the date of this
Agreement, any "Majority Holder" (as such term is defined in Section 5(c)(iii)
below) of the Registrable Securities shall have the right (which right is in
addition to the piggyback registration rights provided for under Section 5(b)
hereof), exercisable by written notice to the Company (the "Demand Registration
Request"), to have the Company prepare and file with the Securities and Exchange
Commission (the "Commission"), on one occasion, at the sole cost and expense of
the Company, a Registration Statement and such other document, including a
prospectus, as may be necessary (in the opinion of both counsel for the Company
and counsel for such Majority Holder), in order to comply with the provisions of
the 1933 Act, so as to permit a public offering and sale of the Registrable
Securities by the holders thereof, for a period of 24 consecutive months,
provided, that, if any such Majority Holder shall so request within a reasonable
time prior to the end of such 24 month period, such Majority Holder shall also
have the right to have the Company take such actions as may be necessary to
extend the period of effectiveness of such Registration Statement and the public
offering and sale of the Registrable Securities for such additional time (not to
exceed an additional 24 months) as may be reasonably requested by such Majority
Holder.
(ii) The Company covenants and agrees to give written notice of any
Demand Registration Request to all holders of the Registrable Securities within
ten days from the date of the Company's receipt of any such Demand Registration
Request. After receiving notice from the Company as provided in this Section
5(c)(ii), holders of Registrable Securities may request the Company to include
their Registrable Securities in the Registration Statement to be filed pursuant
to Section 5(c)(i) hereof by notifying the Company of their decision to include
such securities within ten days of their receipt of the Company's notice.
(iii) The term "Majority Holder" as used herein shall mean any holder
or any combination of holders of Registrable Securities, if such holders'
aggregate number of Warrant Shares (including Shares already issued and Warrant
Shares issuable pursuant to the exercise of outstanding Warrants) of Registrable
Securities constitute a majority of the aggregate number of Warrant Shares
(including Warrant Shares already issued and Warrant Shares issuable pursuant to
the exercise of outstanding Warrants) of the Registrable Securities.
(iv) A registration under this Section 5(c) will not be deemed to have
been effected unless the Registration Statement has been declared effective by
the Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of the Registrable Securities pursuant to
such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the Commission or any other
governmental or administrative agency, the NASD or if the Commission, any other
governmental or administrative, the NASD agency or any court prevents or
otherwise limits the sale of the Registrable Securities pursuant to the
registration, such registration will be deemed not to have been effected as to
the Registrable Securities subject to such stop order, injunction, other order,
requirement or limitation. If (x) a registration requested pursuant to this
Section 5(c) is deemed
-15-
20
not to have been effected or (y) the Registration Statement requested pursuant
to this Section 5(c) does not remain effective for a period of at least 24
consecutive months beyond the effective date thereof or such longer period as
any Majority Holder may have requested pursuant to this Section 5(c), then the
Company shall continue to be obligated to effect such registration pursuant to
this Section 5(c).
(d) Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to Section 5(c) hereof (each, a "Selling Holder"), the Company will use its best
efforts to effect registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(i) The Company will expeditiously as possible prepare and
file with the Commission a Registration Statement on any form for which
the Company then qualifies or which counsel for the Company shall deem
appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with
the intended method of distribution thereof, and use its best efforts
to cause such filed Registration Statement to become and remain
effective for a period of not less than 24 consecutive months.
(ii) The Company will as expeditiously as possible prepare and
file with the Commission such amendments and supplements to such
Registration Statement and the prospectus used in connection therewith
as may be necessary to keep such Registration Statement effective for a
period of not less than 24 consecutive months or for such longer period
as any Majority Holder may have requested pursuant to Section 5(c)
above, and comply with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended method of
disposition of each holder of Registrable Securities selling
Registrable Securities thereunder.
(iii) The Company will, prior to filing a Registration
Statement or prospectus or any amendment or supplement thereto, furnish
to (x) each Selling Holder and (y) not more than one counsel
representing all Selling Holders, to be selected by the Majority
Holder, copies of such Registration Statement, each amendment or
supplement thereto and any prospectus included in such Registration
Statement (including any preliminary prospectus) as proposed to be
filed, together with exhibits thereto and documents incorporated by
reference therein, which documents will be subject to review and
approval by the foregoing within five days after delivery, and
thereafter furnish to such Selling Holders and counsel such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents
incorporated by reference therein), any prospectus included in such
Registration Statement (including any preliminary prospectus) and such
other documents or
-16-
21
information as such Selling Holders or counsel may reasonably request
in order to facilitate the disposition of the Registrable Securities
owned by such Selling Holders.
(iv) After the filing of the Registration Statement, the
Company will promptly notify each Selling Holder of Registrable
Securities covered by such Registration Statement of any stop order
issued or threatened by the Commission in connection therewith and take
all reasonable actions required to prevent the entry of such stop order
and to remove it if entered.
(v) The Company will use its reasonable efforts to (x)
register or qualify such Registrable Securities under the securities or
blue sky laws of such jurisdictions in the United States as any Selling
Holder of such Registrable Securities may reasonably (in light of such
Selling Holder's intended plan of distribution, if any) request, and
(y) cause such Registrable Securities to be registered with or approved
by such other governmental agencies or authorities in the United States
as may be necessary by virtue of the business and operations of the
Company and do any and all other acts and things that may be reasonably
necessary or advisable to enable such Selling Holder to consummate the
disposition of the Registrable Securities owned by such Selling Holder;
provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph (v), (B) subject itself to
taxation in any such jurisdiction, or (C) consent to general service of
process in any such jurisdiction.
(vi) The Company will immediately notify each Selling Holder
of such Registrable Securities, at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, (x) of the
occurrence of any event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, (y) promptly make available to each Selling
Holder the number of copies of any such supplement or amendment as each
Selling Holder may reasonably request, and (z) of the period during
which sales of the Registrable Securities cannot be made.
(vii) The Company will enter into customary agreements and
take such other actions as are reasonably required in order to expedite
or facilitate the disposition of such Registrable Securities.
(viii) The Company will use its reasonable efforts to cause
all such Registrable Securities (other than the Warrants) to be listed
on each exchange or
-17-
22
market on which the Common Stock is then listed (if any), if the
listing of such Registrable Securities is then permitted under the
rules of such exchange or market and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register
as such with respect to such Registrable Securities with the National
Association of Securities Dealers, Inc. (the "NASD").
(ix) The Company will appoint a transfer agent and registrar
for all such Registrable Securities covered by such Registration
Statement not later than the effective date of such Registration
Statement. The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding such
Selling Holder's proposed distribution of Registrable Securities as the
Company may from time to time reasonably request and such other
information as may be legally required in connection with such
registration including, without limitation, all such information as may
be requested by the Commission or the NASD. The Company may exclude
from such registration any Selling Holder who fails to provide such
information.
(e) Registration Expenses. In connection with any Demand Registration
pursuant to Section 5(c) hereof and any Piggyback Registration pursuant to
Section 5(b) hereof, the Company shall pay the following registration expenses
incurred in connection with the registrations thereunder: (i) all registration
and filing fees, (ii) fees and expenses of compliance with securities or blue
sky laws (including fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (iii) fees and expenses
associated with filings to be made with the NASD (including fees and
disbursements of counsel in connection therewith), (iv) printing expenses, (v)
the Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
(vi) the fees and expenses incurred in connection with the listing of the
Registrable Securities, (vii) fees and disbursements of counsel for the Company
and customary fees and expenses for independent public accountants retained by
the Company, (viii) the fees and expenses of any special experts retained by the
Company in connection with such registration, (ix) reasonable fees and expenses
of one firm of counsel for the Selling Holders to be chosen by the Majority
Holder and (x) any reasonable out-of-pocket expenses of the Selling Holders. The
Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities, such costs to be
borne by the holder or holders making the request.
-18-
23
(f) Indemnification and Contribution.
(i) The Company agrees to indemnify, defend and hold harmless any
holder of Registrable Securities to be sold pursuant to any Registration
Statement, any person deemed to be an underwriter under the 1933 Act and each
person, if any, who controls such holder or person deemed to be an underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange
Act, each such holder or person deemed to be an underwriter's agent, employee,
officer and/or director and the agents, employees, officers and directors of any
such controlling persons (collectively, the "Holder Indemnified Parties") from
and against any losses, claims, damages, judgements, liabilities and expenses,
joint or several (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense, settlement, and
investigation and all reasonable attorneys' fees and expenses), to which such
Holder Indemnified Party may become subject (regardless of whether the Holder
Indemnified Party is a party to the litigation, if any) under the 1933 Act or
otherwise, and will reimburse, as incurred, such Holder Indemnified Party for
any legal or other expenses reasonably incurred in connection with settling,
investigating, defending against or appearing as a third party witness in
connection with any losses, claims, damages, judgments, liabilities and
expenses, insofar as such losses, claims, damages, judgments, liabilities and
expenses (or actions in respect thereof) (x) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
(A) a Registration Statement or any other registration statement filed by the
Company under the 1933 Act, any preliminary prospectus or prospectus included
therein, or any amendment or supplement thereto, required to be filed or
furnished by reason of this Agreement, or (B) any blue sky application or other
document executed by the Company specifically for that purpose or based upon
written information furnished by the Company filed in any state or other
jurisdiction in order to qualify any or all of the Registrable Securities under
the securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or (y) arise out of or are based
upon the omission or alleged omission to state in any such registration
statement, any preliminary prospectus, prospectus, or any amendment or
supplement thereto, or in any Blue Sky Application, a material fact required to
be stated therein or necessary to make the statements therein, and with respect
to any preliminary prospectus or prospectus, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company will
not be liable in any such case to the extent, but only to the extent, that any
such loss, claim, damage, judgment, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made based upon, and in conformity with, written information
furnished by any holder of Registrable Securities to the Company concerning the
holders of Registrable Securities specifically for use in the preparation of
such registration statements or any such amendment or supplement thereof or any
such Blue Sky Application or any such preliminary prospectus or prospectus or
any such amendment or supplement thereto. This indemnity will be in addition to
any liability which the Company may otherwise have.
If any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any Holder
Indemnified Party with respect to which indemnity may be sought against the
Company pursuant to this Section 5(f), such Holder
-19-
24
Indemnified Party shall promptly notify the Company in writing of the
institution of such action, and the Company shall assume the defense of such
action, including the employment of counsel satisfactory to the Holder
Indemnified Party and payment of all fees and expenses; provided, that the
omission so to notify the Company shall not relieve the Company from any
liability that it may have to any Holder Indemnified Party unless such an
omission to notify the Company prejudices the Company's ability to defend such
actions or proceeding. A Holder Indemnified Party shall have the right to employ
separate counsel in any such action or proceeding and to assume the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Holder Indemnified Party unless (i) the employment of such counsel shall
have been authorized in writing by the Company, (ii) the Company has failed
promptly to assume the defense and employ counsel satisfactory to the Holder
Indemnified Party after being notified in writing by the Holder Indemnified
Party of such action or proceeding, or (iii) such Holder Indemnified Party shall
have reasonably concluded that there may be one or more defenses available to
the Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the Holder Indemnified Party), in any of
which events such fees and expenses shall be borne by the Company and reimbursed
as they are incurred. It is understood, however, that the Company shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for all such Holder Indemnified Parties, which firm shall be designated in
writing by the Majority Holder and that all such fees and expenses shall be
reimbursed as they are incurred. Anything in this paragraph to the contrary
notwithstanding (i) no Holder Indemnified Party shall be liable for any
settlement of any such claim or action effected without the written consent of
such Holder Indemnified Party (which consent shall not be unreasonably withheld
or delayed), but if settled with the written consent of the Holder Indemnified
Parties, or if there is a final judgment with respect thereto, the Company
agrees to indemnify and hold harmless each Holder Indemnified Party from and
against any loss or liability by reason of such settlement or judgment and (ii)
no settlement of any such claim or action shall be effected without including an
unconditional and irrevocable release of the Holder Indemnified Parties from all
liability in respect of such claim or action.
(ii) Each holder of Registrable Securities severally, but not jointly
and severally, will indemnify, defend and hold harmless the Company, each of its
directors, each nominee (if any) for director named in the prospectus included
in the Registration Statement, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act
(collectively, the "Company Indemnified Parties") to the same extent as the
foregoing indemnity from the Company but only with respect to written
information furnished through such holder of Registrable Securities to the
Company concerning such holder of Registrable Securities specifically for use in
the preparation of such Registration Statement or prospectus. In case any action
shall be brought against any Company Indemnified Party based on such
Registration Statement or any prospectus and in respect of which indemnity may
be sought against any holder of Registrable Securities pursuant to this Section
5(f)(ii), the holder of Registrable Securities shall have the rights and duties
given to the Company by Section 5(f) (except that if the Company
-20-
25
shall have assumed the defense thereof such holder shall not be required to do
so, but such holder may nonetheless employ separate counsel therein and
participate in the defense thereof; provided that the fees and expenses of such
separate counsel shall be at such holder's expense), and the Company Indemnified
Parties shall have the rights and duties given to the Holder Indemnified Parties
by Section 5(f)(i).
(iii) In order to provide for just and equitable contribution under the
1933 Act in any case in which (x) any Holder Indemnified Party or the Company
makes claim for indemnification pursuant to Section 5(f) hereof but it is
judicially determined by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such
case, notwithstanding the fact that the express provisions of Section 5(f)
provide for indemnification in such case, or (y) contribution under the 1933 Act
may be required on the part of any holder of Registrable Securities or Company
Indemnified Party, then the Company Indemnified Party and any such holder of
Registrable Securities shall contribute to the aggregate losses, claims,
damages, judgments, liabilities or expenses to which they may be subject (which
shall, for all purposes of this Agreement, include, but not be limited to, all
reasonable costs of defense, settlement and investigation and all reasonable
attorneys' fees and expenses) in either such case (after contribution from
others) in such proportions as is appropriate to reflect the relative fault of
the Company and any holder of Registrable Securities in connection with the
statements or omissions which resulted in such damages and other relevant
equitable considerations shall also be considered. The relative fault shall be
determined by reference to, among other things, whether in the case of an untrue
statement of a material fact or the omission to state a material fact, such
statement or omission relates to information supplied by the Company, or the
holder of Registrable Securities and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Holder agree (A) that it would not be
just and equitable if the respective obligations of the Company and the holders
of Registrable Securities to contribute pursuant to this Section 5(f)(iii) were
to be determined by pro rata or per capita allocation of the aggregate damages
(even if the holders of Registrable Securities were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the first sentence of this Section
5(f)(iii), and (B) that the contribution of each contributing holder of
Registrable Securities shall not be in excess of the proceeds received by such
person from sales of Registrable Securities unless such holder of Registrable
Securities is found guilty by a court of competent jurisdiction of fraudulent
misrepresentation. No person guilty of a fraudulent misrepresentation (within
the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to contribution
from any person who is not guilty of such fraudulent misrepresentation. If the
full amount of the contribution specified in this paragraph is not permitted by
law, then any holder of Registrable Securities shall be entitled to contribution
from the Company and the Company shall be entitled to contribution from any
holder of Registrable Securities to the full extent permitted by law.
(iv) Notwithstanding anything contained herein to the contrary, no
holder of Registrable Securities or person that controls any such holder within
the meaning of the 1933 Act, if
-21-
26
applicable, shall be obligated to indemnify any Company Indemnified Party or to
make any contribution pursuant to this Section 5(f), in an amount in excess of
the net proceeds received by such holder of Registrable Securities with respect
to the sale of its Registrable Securities unless such holder of Registrable
Securities is found guilty by a court of competent jurisdiction of fraudulent
misrepresentation.
(g) No Obligation to Exercise. Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise its Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
Section 6. Transferability. This Warrant shall be transferable in whole
or in part to one or more transferees. Any such transfer, assignment or
conveyance shall be made on the books of the Company maintained for such purpose
at the principal office of the Company upon surrender of this Warrant and a
properly completed and executed assignment substantially in the form of Exhibit
B attached hereto.
Section 7. Exchangeability. This Warrant is exchangeable, upon the
surrender hereof by the Holder at said office of the Company, for new Warrants
of like tenor and date representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the Holder at the time of such surrender.
Section 8. Lost, Stolen, Mutilated or Destroyed Warrant. Upon receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
mutilation or destruction of this Warrant, receipt by the Company of an executed
affidavit of lost or stolen warrant and, if reasonably requested by the
Company's transfer agent or any federal or state laws, rules or regulations the
post of a bond by the Holders and, in case of loss, theft or destruction, upon
the agreement of the Holder to indemnify and hold harmless the Company, and its
directors and officers against any and all loss, liability, damage, cost and
expenses (including reasonable attorneys' fees) which may be incurred by the
Company in connection with, or arising out of, the issuance of a new Warrant or,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall issue a new Warrant of like denomination and tenor as the Warrant
so lost, stolen, mutilated or destroyed.
Section 9. No Voting Rights. This Warrant shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company whatsoever,
except the rights expressed herein, and no dividend or interest shall be payable
or accrue in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until and unless, and except to the extent that,
this Warrant shall be exercised.
Section 10. Definition of Common Stock. As used herein, "Common Stock"
shall mean the Common Stock, par value $0.01 per share, of the Company as
authorized on the date hereof, and also any capital stock of any class of the
Company hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
-22-
27
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company; provided, however, that
the shares purchasable pursuant to this Warrant shall include only shares
designated as Common Stock, par value $0.01 per share, of the Company on the
date hereof, or shares of any class or classes resulting from any
reclassification or reclassifications thereof which are not limited to any such
fixed sum or percentage and are not subject to redemption by the Company and in
case at any time there shall be more than one such resulting class, the shares
of each such class then so issuable shall be substantially in the proportion
which the total number of shares of such class resulting from all such
reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
Section 11. Miscellaneous.
(a) Amendment of Warrant. This Warrant may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) Successors and Assigns. This Warrant will be binding upon and inure
to the benefit of and is enforceable by the respective successors and permitted
assigns of the parties hereto.
(c) No Waiver; Remedies. No failure or delay by any party in exercising
any right, power or privilege under this Agreement will operate as a waiver of
the right, power or privilege. A single or partial exercise of any right, power
or privilege will not preclude any other or further exercise of the right, power
or privilege or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement will be cumulative and not exclusive of
any rights or remedies provided by law.
(d) Severability. If any term or other provision of this Warrant is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Warrant will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto will negotiate in
good faith to modify this Warrant so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
(e) Governing Law. This Warrant will be governed by, and construed in
accordance with, the internal laws of the State of New York without giving
effect to any choice of law or conflict of law, provision or rule of the State
of New York.
(f) Counterparts. This Warrant may be executed simultaneously in one or
more counterparts, and by different parties hereto in separate counterparts,
each of which when executed will be deemed an original, but all of which taken
together will constitute one and the same instrument.
-23-
28
(g) Descriptive Headings. The headings in this Warrant and in the
schedules and exhibits hereto are included for convenience of reference only and
will not affect in any way the meaning or interpretation of this Agreement.
(h) Submission to Jurisdiction. Any lawsuit, action or proceeding with
respect to this Warrant may be brought in the courts of the State of New York or
of the United States of America for the Southern District of New York, and each
of the Company and the Holder hereby accept for themselves and in respect of its
property, generally and unconditionally, the jurisdiction of these courts. Each
of the Company and the Holder hereby irrevocably waives any objection,
including, without limitation, any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any lawsuit, action or proceeding in those jurisdictions.
-24-
29
IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be executed as of the date first written above.
NORTHSTAR HEALTH SERVICES, INC.
By:____________________________________
Name:
Title:
CERBERUS CAPITAL MANAGEMENT, LLC, as
Agent for the Lenders under the
Credit Agreement
By:____________________________________
Name:
Title:
-25-
