Exhibit 10.5
WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
ENCORE MEDICAL CORPORATION
COMMON STOCK WARRANT
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No. CS-1 Void after February 8, 2009
WARRANT TO PURCHASE SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, CapitalSource Holdings LLC (the
"Holder") is entitled to subscribe for and purchase such number of fully paid
and nonassessable shares (as adjusted pursuant to Section 3 hereof, the
"Shares") of the Common Stock (the "Common Stock"), of Encore Medical
Corporation, a Delaware corporation (the "Company"), as is set forth in Section
1(b) below, at the price of $0.01 per Share (as adjusted pursuant to Section 3
hereof, the "Exercise Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. This Warrant is being issued and delivered
pursuant to that certain Note and Equity Purchase Agreement dated as of February
8, 2002 (the "Purchase Agreement"), by and among the Company and CapitalSource
Finance LLC. Capitalized terms used and not otherwise defined herein shall have
the meanings given such terms in the Purchase Agreement.
1. Method of Exercise; Payment.
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(a) Exercise. This Warrant shall be exercisable in whole or in part
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from and after 5:00 p.m., Central Time on the earlier of (i) February 8, 2003
and (ii) the date of an Event of Default until 5:00 p.m., Central time, on the
Expiration Date (as defined below).
(b) Number of Shares. The number of Shares purchasable under
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this Warrant shall initially be 2,150,000. In the event that the Company obtains
the consent of its stockholders required to comply with NASDAQ Rule
4350(i)(1)(D) prior to July 1, 2002 (the "Stockholder Consent"), the number of
Shares purchasable under this Warrant shall be increased to 2,198,614 (subject
to adjustment as provided herein).
(c) Cash Exercise. The purchase rights represented by this Warrant may
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be exercised by the Holder, in whole or in part, by the surrender of this
Warrant (with the "Notice of
Exercise" form attached hereto as Exhibit A duly executed) at the principal
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office of the Company, and by the payment to the Company, by certified,
cashier's or other check acceptable to the Company, of an amount equal to the
aggregate Exercise Price of the Shares being purchased.
(d) Net Issue Exercise. In lieu of exercising this Warrant,
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the Holder may elect to receive Shares equal to the value of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the Notice of Exercise, in which
event the Company shall issue to the Holder a number of Shares computed using
the following formula:
X = Y (A-B)
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A
Where X = the number of the Shares to be issued to the Holder.
Y = the number of the Shares purchasable under this Warrant
(without regard to the net issue exercise provisions of
this Section l(d)) or, if only a portion of the Warrant
is exercised, the portion of the Warrant being canceled
(at the date of such calculation).
A = the fair market value of one share of the Shares (at the
date of such calculation).
B = the Exercise Price (as adjusted to the date of such
calculation).
(e) Fair Market Value. For purposes of this Warrant, the per share
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"fair market value" of the Shares shall mean:
(i) If the Company's Common Stock is publicly traded, the per
share fair market value of the Shares shall be the average of the closing prices
of such Common Stock as quoted on the Nasdaq National Market or the principal
exchange on which the Common Stock is listed for the 20 trading days prior to
the date of exercise of this Warrant, or if not so listed then the fair market
value shall be the average of the last reported sale prices of the Common Stock
for each of the 20 trading days prior to the date of exercise of this Warrant
(or the average closing bid and asked prices of the Common Stock for each such
day if no sale is made on such day), in each case as published in The Wall
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Street Journal; or
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(ii) If the Company's Common Stock is not so publicly traded, the
per share fair market value of the Shares shall be such fair market value as is
determined in good faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof); provided that if the Holder does not
approve such determination by the Board of Directors, the fair market value
shall be determined based on earnings and book value and other appropriate items
in accordance with the following procedures:
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(A) the Holder will recommend three qualified, independent
appraisers to the Company;
(B) the Company will select and compensate one of the three
appraisers to determine a value;
(C) if either the Holder or the Company is dissatisfied with
the value determined by the first appraiser, that Person may designate and
compensate an appraiser of its choice to determine a second value;
(D) if the second value is within 10% of the first value or
if the Holder and the Company agree, the average of the two values will be the
"fair market value";
(E) if the second value is not within 10% of the first
value, and if either the Holder or the Company is dissatisfied with the second
value, that Person may designate and compensate an appraiser of its choice to
determine a third value;
(F) the average of the two values that are nearest will be
the "fair market value".
(f) Stock Certificates. Promptly upon receipt of a Notice of Exercise,
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the Company will issue and deliver such Common Stock under this Warrant. In the
event of any exercise of the rights represented by this Warrant, certificates
for the Shares so purchased shall be delivered to the Holder within five (5)
days and, unless this Warrant has been fully exercised or has expired, a new
Warrant representing the shares with respect to which this Warrant shall not
have been exercised shall also be issued to the Holder within such time.
2. Stock Fully Paid. All of the Shares issuable upon the exercise of the
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rights represented by this Warrant will, upon issuance and receipt of the
Exercise Price therefor, be duly and validly authorized and issued fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof.
3. Adjustment to the Number of Shares Issuable and/or the Exercise Price.
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The number of Shares issuable upon the exercise of this Warrant and the Exercise
Price are subject to adjustment from time to time as set forth in this Section
3. Upon each adjustment pursuant to this Section 3, the Holder shall thereafter
be entitled to purchase the adjusted number of shares of Common Stock at such
new Exercise Price.
(a) If the Company at any time while this Warrant, or any portion
hereof, remains outstanding and unexpired shall split, subdivide or combine the
Common Stock, then (i) the number of shares of Common Stock purchasable pursuant
to this Warrant shall be proportionately increased and the Exercise Price shall
be proportionately decreased in the case of a split or subdivision or (ii) the
number of shares of Common Stock purchasable pursuant to this Warrant shall be
proportionately decreased and the Exercise Price shall be proportionately
increased in the case of a combination. Any adjustment made pursuant to this
Section 3(a) shall become effective immediately after the effective date of a
split, subdivision or combination.
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(b) If while this Warrant, or any portion hereof, remains outstanding
and unexpired, the holders of Common Stock shall have received, or, on or after
the record date fixed for the determination of eligible stockholders, shall have
become entitled to receive, without payment therefor, other or additional stock
or other securities or property (other than cash) of the Company by way of
dividend, then and in each case, this Warrant shall represent the right to
acquire, in addition to the number of shares of Common Stock receivable upon
exercise of this Warrant and without payment of any additional consideration
therefor, the amount of such other or additional stock or other securities or
property (other than cash) of the Company that such holder would hold on the
date of such exercise had it been the holder of record of the Common Stock
receivable upon exercise of this Warrant on the date hereof and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and/or all other additional stock available by it
as aforesaid during such period, giving effect to all adjustments called for
during such period by the provisions of this Section 3.
(c) If the Company, at any time while this Warrant, or any portion
hereof, remains outstanding and unexpired by reclassification of securities or
otherwise, shall change any of the Common Stock as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the Common Stock that is subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 3.
(d) If at any time while this Warrant, or any portion hereof, is
outstanding and unexpired there shall be in one or a series of transactions (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 3. The foregoing provisions of this Section 3(d) shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors.
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(e) As of the date hereof, the shares of Common Stock purchasable
pursuant to this Warrant have an aggregate implied value (the "Implied Value")
of $6,772,500 (provided that, in the event the Company obtains the Stockholder
Consent and the number of shares of Common Stock purchasable pursuant to this
Warrant is increased as provided in Section 1(b), the Implied Value as of the
date hereof shall be deemed to be $6,925,634.10), determined by multiplying the
number of shares of Common Stock purchasable pursuant to this Warrant by $3.15
(the "Implied Value Per Share"). If during the period beginning with the date
hereof and ending on August 8, 2002 (the "Initial Period"), the Company issues
Additional Shares of Common Stock (as defined below) for a consideration per
share of Common Stock (calculated on an as-converted basis for Common Stock
Equivalents) (the "Subsequent Value Per Share") less than the Implied Value Per
Share (as adjusted for any split, subdivision, combination, merger,
consolidation or other reorganization (collectively, "Corporate Event")), then
the number of shares of Common Stock purchasable pursuant to this Warrant (as
adjusted for any Corporate Event) shall be increased to that number of shares of
Common Stock equal to the Implied Value divided by the Subsequent Value Per
Share.
If after the Initial Period, the Company issues Additional Shares of Common
Stock for a Subsequent Value Per Share less than the Implied Value Per Share (as
adjusted for any Corporate Event), then the number of shares of Common Stock
purchasable pursuant to this Warrant (as adjusted for any Corporate Event) shall
be increased to that number of shares of Common Stock equal to the Implied Value
divided by a price per share equal to the quotient obtained by dividing:
(A) an amount equal to the sum of (x) the total shares of Common Stock
Deemed Outstanding immediately prior to such issuance, multiplied by the
Implied Value Per Share, and (y) the consideration received by the Company
upon such issuance of Additional Shares of Common Stock; by
(B) the total number of shares of Common Stock Deemed Outstanding
immediately after the issuance of such Additional Shares of Common Stock.
Such adjustment shall be made successively whenever such an issuance is
made.
(f) Readjustment.
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(i) If any option or right, the issuance of which resulted in an
adjustment under paragraph (e) above, expires without having been exercised
prior to the exercise by the Holder of its rights hereunder, the number of
shares of Common Stock then issuable hereunder shall then be readjusted to such
lesser number as would have been issuable had the option or right never been
issued.
(ii) If any right to convert or exchange any Common Stock
Equivalent, the issuance of which resulted in an adjustment hereunder, expires
without having been exercised prior to the exercise by Holder of its rights
hereunder, the number of shares of Common Stock then issuable hereunder shall
then be readjusted to such lesser number as would have been issuable had the
Common Stock Equivalent never been issued.
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(iii) If any right to convert, exercise or exchange any Common
Stock Equivalent, the issuance of which resulted in an adjustment hereunder,
provides by its terms for the issuance of a variable number of shares of Common
Stock or a variable per share price (a "Variable Security"), then the maximum
number of shares of Common Stock issuable under such Variable Security
(including without limitation any additional shares that may be issued pursuant
to any employment agreement or other document with respect thereto) shall be
used for the calculation of Common Stock Deemed Outstanding, and the minimum per
share price shall be used to determine whether such transaction requires an
adjustment hereunder. In the event that the number of shares of Common Stock
issuable under the Variable Security decreases (other than through partial
conversion, exchange or exercise) or the per share price increases, the number
of shares of Common Stock then issuable hereunder shall be readjusted, as of the
date of the original adjustment, to reflect such decrease or increase.
(g) For purposes of any computation respecting consideration received,
the following shall apply:
(i) in the case of the issuance of shares of Common Stock or
Common Stock Equivalents for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any underwriting of the
issue or otherwise in connection therewith; and
(ii) in the case of the issuance of shares of Common Stock or
Common Stock Equivalents for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of Directors of the
Company (irrespective of the accounting treatment thereof), whose determination
for purposes of this Section 3(g)(ii) shall be conclusive.
(h) For the purposes of this Section 3, the following clauses shall
also be applicable:
(i) Treasury Shares. The number of shares of Common Stock Deemed
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Outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Additional Shares of Common Stock for the
purposes of this Section 3.
(ii) Certain Issues Excepted. Anything herein to the contrary
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notwithstanding, the Company shall not be required to make any adjustment of any
Exercise Price in the event that the Company shall grant one or more of options
to purchase up to 1,394,429 shares of Common Stock in the aggregate pursuant to
a stock option plan approved by the Board of Directors of the Company and, if
required by the shareholders of the Company, and granted to directors, officers,
employees and consultants of the Company or any other Loan Party (as defined in
the Purchase Agreement).
(i) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01) in
such price; provided, however, that any adjustments which by reason of this
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subsection are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required
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to be made hereunder. In no event shall the Exercise Price be decreased below
the par value of the Common Stock. All calculations shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(j) If prior to the date on which the Stockholder Consent is obtained
there are any adjustments to the number of Shares issuable upon exercise of this
Warrant or the Exercise Price pursuant to this Section 3 and such Stockholder
Consent is thereafter obtained, then all such adjustments shall be recalculated
as if the number of Shares issuable upon exercise of this Warrant on the date
hereof was 2,198,614.
(k) Any determination that the Company or the Board of Directors must
make pursuant to this Section 3 shall be conclusive if made in good faith.
4. Notices.
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(a) Whenever the number of Shares purchasable hereunder or the
Exercise Price thereof shall be adjusted pursuant to Section 3 hereof, the
Company shall provide notice to the Holder setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the number and class of Shares which
may be purchased and the Exercise Price therefor after giving effect to such
adjustment.
(b) If the Company (i) pays any dividend, or makes any distribution,
or repurchases or redeems any of its Common Stock, or (ii) offers any
subscription rights pro rata to the holders of its Common Stock any additional
shares of stock of any class or any other rights, then at least 15 days prior to
the record date for such action, the Company will send written notice (by first
class mail, postage prepaid, addressed to the Holder at its address shown on the
books of the Company) of the dates on which (A) the Company will close its books
or take a record for such action, (B) such action will occur and (C) the holders
of Common Stock of record will participate in such action.
(c) If the Company (i) enters into any reorganization, merger,
consolidation, sale or transfer or any reclassification of its capital stock, or
(ii) is the subject of a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then at least 15 days prior to such action, the
Company will send written notice (by first class mail, postage prepaid,
addressed to the Holder at its address shown on the books of the Company) of the
dates on which (A) the Company will close its books or take a record for such
action, (B) such action will occur and (C) the holders of capital stock of
record may exchange their capital stock for securities or other property
deliverable upon such action.
5. Fractional Shares. This Warrant may not be exercised for fractional
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shares. In lieu of fractional shares the Company shall make a cash payment
therefor based upon the per share fair market value of a Share then in effect.
6. Representations and Warranties.
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(a) The Company represents and warrants that all corporate actions on
the part of the Company, its officers, directors and shareholders necessary for
the sale and issuance
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of the Shares pursuant hereto and the performance of the Company's obligations
hereunder were taken prior to and are effective as of the effective date of this
Warrant.
(b) The Holder of this Warrant represents and warrants that this
Warrant and Common Stock to be issued upon exercise hereof are being acquired
solely for the Holder's own account and not as a nominee for any other party,
and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Common Stock to be issued upon exercise
hereof except under circumstances that will not result in a violation of the
Securities Act or any state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
reasonably satisfactory to the Company, that the shares of Common Stock so
purchased are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
7. Transfer. Neither this Warrant nor any of the Shares (when issued) may
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be sold, assigned, transferred, pledged or hypothecated or otherwise disposed of
except (i) pursuant to an effective registration statement under the Securities
Act or pursuant to an available exemption from the registration requirements
thereunder and in compliance with applicable state securities laws and (ii) in a
minimum amount of 250,000 Shares (as adjusted for any Corporate Event) (other
than any portion of this Warrant or the Shares transferred to Galen Associates
in accordance with the terms of the Galen Agreement). The Shares (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form):
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
8. Rights of Shareholders. Except as otherwise expressly provided herein
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or in the Investor Rights Agreement dated as of February 8, 2002 by the Holder
and the Company (as the same may be amended from time to time), no holder of
this Warrant shall be entitled, as a Warrant holder, to vote or receive
dividends or be deemed the holder of the Shares or any other securities of the
Company which may at any time be issuable on the exercise hereof for any
purpose, or to have any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or
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otherwise until the Warrant shall have been exercised and the Shares purchasable
upon the exercise hereof shall have become deliverable, as provided herein.
9. Expiration of Warrant. This Warrant shall expire and shall no longer be
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exercisable after 5:00 p.m., Central Time, on February 8, 2009 (the "Expiration
Date").
10. Notices. All notices and other communications required or permitted
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hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid, guaranteeing overnight
delivery, or (d) upon telephone or further electronic communication from the
recipient acknowledging receipt (whether automatic or manual from recipient), if
delivered by facsimile or electronic transmission, and shall be addressed (i) if
to the Holder, at the Holder's address as set forth on the register maintained
by the Company, and (ii) if to the Company, at the address of its principal
corporate offices (attention: Chief Executive Officer) or at such other address
as a party may designate by ten days advance written notice to the other party
pursuant to the provisions above.
11. Warrant Register. The Company will maintain a register (the "Warrant
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Register") containing the name and address of the Holder and its permitted
transferees and assigns. The Holder of this Warrant or any portion thereof may
change its address as shown on the Warrant Register by written notice to the
Company requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be delivered or given by mail to such
Holder as shown on the Warrant Register and at the address shown on the Warrant
Register. To effect a transfer permitted by Section 7 hereof, the Holder must
present (either in person, or by duly authorized attorney) written notice
substantially in the form of Exhibit B attached hereto. To prevent a transfer in
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violation of Section 7, the Company may issue appropriate stop orders to its
transfer agent.
12. Payment of Taxes. The Company will pay all documentary stamp taxes
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attributable to the issuance of Shares upon the exercise of this Warrant;
provided, however, that the Company shall not be required to pay any tax or
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taxes which may be payable in respect of any transfer involved in the
registration of any certificates for Shares in a name other than that of the
Holder, and the Company shall not be required to issue or deliver the
certificates for Shares unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
The Holder shall be responsible for all other tax liability that may arise as a
result of holding this Warrant or receiving the Shares under this Warrant.
13. Replacement of Warrant; Transfer.
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(a) If this Warrant is mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Warrant, a new Warrant of like
tenor, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and indemnity, if requested,
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reasonably satisfactory to it. Holder shall also comply with such other
reasonable regulations and pay such other reasonable charges attributable to the
replacement of this Warrant.
(b) This Warrant and any of the Shares (when issued) are freely
transferable subject to the requirements of Section 7 hereof.
14. Reservation of Shares. The Company will at all times reserve and keep
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available out of the aggregate of its authorized but unissued Common Stock or
its authorized and issued Common Stock held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Shares upon exercise of the
Warrants, a number of shares of Common Stock equal to the maximum number of
Shares (as adjusted from time to time pursuant to Section 3 hereof) which may
then be deliverable upon the exercise of this Warrant and all other outstanding
warrants issued and sold pursuant to the Purchase Agreement.
15. Rights of Holder. If the Company offers to repurchase or redeem, which
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offer is made generally available to the holders of the Common Stock of the
Company, the Company will offer to include the Holder in such repurchase or
redemption, as if the Holder had exercised this Warrant immediately prior to
such event (or any record date with respect thereto). If the Holder elects to
participate in a repurchase or redemption, this Warrant shall be modified (as of
the date of such event) so that the Holder shall be entitled to receive, upon
exercise, the number of shares of Common Stock issuable hereunder less the
number of shares of Common Stock redeemed or repurchased.
16. Investors' Rights Agreement. The Holder shall have certain rights in
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regard to this Warrant or Shares issued hereunder as set forth in an Investors'
Rights Agreement, as amended, by and among the Company, the Holder and certain
of its shareholders, whether or not such Holder has agreed to become a party
thereto.
17. Definitions. For the purposes hereof, the following terms shall have
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the following meanings:
"Additional Shares of Common Stock" means (a) all shares of Common Stock
and (b) all shares of Common Stock Equivalents, in each case issued by the
Company after the date of this Warrant, whether or not subsequently reacquired
or retired by the Company, other than:
(i) shares of Common Stock issued upon conversion of rights, options or
warrants to acquire, or other securities convertible into or
exchangeable or exercisable for, shares of Common Stock; or
(ii) shares of Common Stock issued in transactions giving rise to
adjustments under Sections 3(a) through (d); or
(iii) shares of Common Stock described in Section 3(h)(ii).
"Common Stock Equivalent" means any security of the Company that is
directly or indirectly convertible, exercisable, or exchangeable into Common
Stock at any time.
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"Common Stock Deemed Outstanding" means, at any given time, the sum of:
(a) the number of shares of Common Stock outstanding at such time,
plus
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(b) the number of shares of Common Stock issuable upon conversion,
exercise, or exchange of any Common Stock Equivalents outstanding at
such time.
18. Governing Law. THIS WARRANT AND ALL ACTIONS ARISING OUT OF OR IN
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CONNECTION WITH THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE CORPORATE LAWS OF THE STATE OF DELAWARE.
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Issued this 8/th/ day of February, 2002.
ENCORE MEDICAL CORPORATION
By: /s/ Harry L. Zimmerman
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Harry L. Zimmerman
Executive Vice President and Secretary
Attachments
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Exhibit A - Notice of Exercise
Exhibit B - Assignment
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EXHIBIT A
NOTICE OF EXERCISE
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TO: Encore Medical Corporation
Attention: Chief Executive Officer
1. The undersigned hereby elects to purchase shares of the Common Stock of
Encore Medical Corporation (the "Company") pursuant to the terms of the attached
Warrant.
2. Method of Exercise (Please initial the applicable blank):
-- The undersigned elects to exercise the attached Warrant by means of
a cash payment, and tenders herewith payment in full for the
purchase price of the shares being purchased, together with all
applicable transfer taxes, if any.
-- The undersigned elects to exercise the attached Warrant by means of
the net exercise provisions of Section 1(d) of the Warrant.
3. Please issue a certificate or certificates representing said Shares in
the name of the undersigned or in such other name as is specified below:
(Name)
(Address)
4. The undersigned hereby represents and warrants that the aforesaid shares
of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof and that the undersigned will not offer, sell or otherwise
dispose of any such shares of Common Stock except under circumstances that will
not result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws.
_____________________________________
(Signature)
Title: ______________________________
_________________
(Date)
A-1
EXHIBIT B
ASSIGNMENT
----------
For value received, the undersigned hereby sells, assigns and transfers
unto:
_______________________________
(Name)
_______________________________
(Address)
the attached Warrant, together with all right, title and interest therein
to purchase [__] shares of the Common Stock, and does hereby irrevocably appoint
_______________________ as attorney-in-fact to transfer said Warrant on the
books of _______________________, with full power of substitution in the
premises.
Done this ______ day of ____________ 20____.
_______________________________
(Signature)
_______________________________
(Name and title)
_______________________________
_______________________________
(Address)
A-2