EXHIBIT 10.5
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
WARRANT TO PURCHASE COMMON STOCK
Corporation: Family Home Health Services Inc., a Nevada corporation
Number of Shares: 250,000
Class of Stock: Common
Initial Exercise Price: $1.20 per share
Issue Date: April 5, 2006
Expiration Date: April 5, 2011
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, the receipt of
which is hereby acknowledged, COMERICA BANK or its assignee ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this warrant, subject to the provisions
and upon the terms and conditions set forth in this warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this warrant by delivering this
warrant and a duly executed Notice of Exercise in substantially the form
attached hereto as Exhibit A to the principal office of the Company. Unless
Holder is exercising the conversion right set forth in Section 1.2, Holder shall
also deliver to the Company a check for the aggregate Warrant Price for the
Shares being purchased.
1.2 Conversion Right. In lieu of exercising this warrant as specified in Section
1.1, Holder may from time to time convert this warrant, in whole or in part,
into a number of Shares determined by dividing (a) the aggregate fair market
value of the Shares or other securities otherwise issuable upon exercise of this
warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share. The fair market value of the Shares shall be determined
pursuant to Section 1.3.
1.3 Fair Market Value. If the Shares are traded regularly in a public market,
the fair market value of the Shares shall be the closing price of the Shares (or
the closing price of the Company's class of stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant. Promptly after Holder exercises or
converts this warrant, the Company shall deliver to Holder certificates for the
Shares acquired and, if this warrant has not been fully exercised or converted
and has not expired, a new warrant representing the Shares not so acquired.
1.5 Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this warrant and,
in the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the
Page 1 of 16 WARRANT
case of mutilation, on surrender and cancellation of this warrant, the Company
at its expense shall execute and deliver, in lieu of this warrant, a new warrant
of like tenor.
1.6 Repurchase on Sale, Merger, or Consolidation of the Company.
1.6.1 "Acquisition." For the purpose of this warrant, "Acquisition" means
(a) any sale, license, or other disposition of all or substantially all of
the assets (including intellectual property) of the Company, or (b) any
reorganization, consolidation, merger or sale of the voting securities of
the Company or any other transaction where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the
transaction.
1.6.2 Assumption of Warrant. If upon the closing of any Acquisition the
successor entity assumes the obligations of this warrant, then this warrant
shall be exercisable for the same securities, cash, and property as would
be payable for the Shares issuable upon exercise of the unexercised portion
of this warrant as if such Shares were outstanding on the record date for
the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the
surviving corporation to assume the obligations of this warrant.
1.6.3 Nonassumption. If upon the closing of any Acquisition the successor
entity does not assume the obligations of this warrant and Holder has not
otherwise exercised this warrant in full, then Holder shall have the option
either to (a) deem this warrant to have been automatically converted
pursuant to Section 1.2 and thereafter Holder shall participate in the
Acquisition on the same terms as other holders of the same class of
securities of the Company; or (b) require the Company to purchase this
warrant for cash upon the closing of the Acquisition for an amount per
Share equal to the Warrant Price.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a dividend on
its common stock payable in common stock, or other securities, but not cash, or
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
warrant, Holder shall be entitled to receive, upon exercise or conversion of
this warrant, the number and kind of securities and property that Holder would
have received for the Shares if this warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic conversion of the outstanding or issuable
securities of the Company of the same class or series as the Shares to common
stock pursuant to the terms of the Company's Articles of Incorporation upon the
closing of a registered public offering of the Company's common stock. The
Company or its successor shall promptly issue to Holder a new warrant for such
new securities or other property. The new warrant shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise
of the new warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
Page 2 of 16 WARRANT
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are combined or
consolidated, by reclassification or otherwise, into a lesser number of shares,
the Warrant Price shall be proportionately increased. If the outstanding Shares
are combined or consolidated, by reclassification or otherwise, into a greater
number of shares, the Warrant Price shall be proportionately decreased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number of
Shares issuable upon exercise of this warrant shall be subject to adjustment,
from time to time, in the manner set forth on attached Exhibit B in the event of
Diluting Issuances (as defined on Exhibit B).
2.5 No Impairment. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant Price,
the Company at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to
such Warrant Price.
2.7 Fractional Shares. No fractional Shares shall be issuable upon exercise or
conversion of the Warrant and the Number of Shares to be issued hereunder shall
be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder an amount computed by
multiplying the fractional interest by the fair market value of a full Share.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and warrants
to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
warrant is not greater than the fair market value of the Shares as of
the date of this warrant.
(b) All Shares which may be issued upon the exercise of the purchase
right represented by this warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of
any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable federal and state securities
laws.
(c) The Company's capitalization table attached as Exhibit D to this
warrant is true and complete as of the Issue Date.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to declare
any dividend or distribution upon its common stock, whether in cash, property,
stock, or other securities and whether or not a regular cash dividend; (b) to
offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights; (c)
to effect any reclassification or recapitalization of common stock; or (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up, then,
Page 3 of 16 WARRANT
in connection with each such event, the Company shall give Holder (1) at least
20 days prior written notice of the date on which a record will be taken for
such dividend, distribution, or subscription rights (and specifying the date on
which the holders of common stock will be entitled thereto) or for determining
rights to vote, if any, in respect of the matters referred to in (a) and (b)
above; and (2) in the case of the matters referred to in (c) and (d) above at
least 20 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of common stock will be entitled
to exchange their common stock for securities or other property deliverable upon
the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this warrant and/or any of
the Shares, the Company shall deliver to the Holder (a) promptly after mailing,
copies of all communiques to the shareholders of the Company, (b) within ninety
(90) days after the end of each fiscal year of the Company, the annual audited
financial statements of the Company certified by independent public accountants
of recognized standing and (c) within forty-five (45) days after the end of each
of the first three quarters of each fiscal year, the Company's quarterly,
unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company agrees
that the Shares or, if the Shares are convertible into common stock of the
Company, such common stock, shall be subject to the registration rights set
forth on attached Exhibit C.
ARTICLE 4. MISCELLANEOUS.
4.1 Term: Exercise Upon Expiration. This warrant is exercisable in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. If this warrant has not been exercised prior to the Expiration
Date, this warrant shall be deemed to have been automatically exercised on the
Expiration Date by "cashless" conversion pursuant to Section 1.2.
4.2 Legends. This warrant and the Shares (and the securities issuable, directly
or indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS WARRANT AND/OR THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This warrant and the Shares
issuable upon exercise of this warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company). The Company shall not require Holder to
provide an opinion of counsel if the transfer is to an affiliate of Holder or if
there is no material question as to the availability of current information as
referenced in Rule 144(c), Holder represents that it has complied with Rule
144(d) and (e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder's
notice of proposed sale.
4.4 Transfer Procedure. Subject to compliance with the provisions of Section
4.3, Holder may transfer all or part of this warrant or the Shares issuable upon
exercise of this warrant (or the securities
Page 4 of 16 WARRANT
issuable, directly or indirectly, upon conversion of the Shares, if any) by
giving the Company notice of the portion of the warrant being transferred
setting forth the name, address and taxpayer identification number of the
transferee and surrendering this warrant to the Company for reissuance to the
transferee(s) (and Holder, if applicable); provided, however, that Holder may
transfer all or part of this warrant to its affiliates, including, without
limitation, Comerica Incorporated, at any time without notice to the Company,
and such affiliate shall then be entitled to all the rights of Holder under this
warrant and any related agreements, and the Company shall cooperate fully in
ensuring that any stock issued upon exercise of this warrant is issued in the
name of the affiliate that exercises the warrant. The terms and conditions of
this warrant shall inure to the benefit of, and be binding upon, the Company and
the holders hereof and their respective permitted successors and assigns. Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, as amended ("Exchange Act"), the Company shall
have the right to refuse to transfer any portion of this warrant to any person
who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time. All notices to the Holder shall be addressed as follows:
Comerica Bank
Attn: Warrant Administrator
500 Woodward Avenue, 32nd Floor, MC 3379
Detroit, MI 48226
4.6 Amendments. This warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties concerning
the terms and provisions of this warrant, the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.
4.8 Governing Law. This warrant shall be governed by and construed in accordance
with the laws of the State of Michigan, without giving effect to its principles
regarding conflicts of law.
This Warrant is executed and delivered as of the Issue Date stated above.
FAMILY HOME HEALTH SERVICES INC.
By: /s/ Kevin Ruark
------------------------------------
Kevin Ruark
Title: CEO
Page 5 of 16 WARRANT
EXHIBIT A
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ______________ shares of the
______________ stock of Family Home Health Services Inc. pursuant to the terms
of the attached warrant, and tenders herewith payment of the purchase price of
such shares in full.
1. The undersigned hereby elects to convert the attached warrant into
shares in the manner specified in the warrant. This conversion is exercised with
respect to ______________ of the shares covered by the warrant.
[STRIKE PARAGRAPH THAT DOES NOT APPLY.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
Comerica Bank
Attn: Warrant Administrator
500 Woodward Avenue, 32nd Floor, MC 3379
Detroit, MI 48226
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
COMERICA BANK or Registered Assignee
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
----------------------------------
Page 6 of 16 WARRANT
EXHIBIT B
ANTI-DILUTION RIDER
(Rider to warrant for 250,000 shares of common stock of
Family Home Health Services Inc. issued on April 5, 2006 to Comerica Bank)
1. Definitions. As used in this Anti-dilution Rider, the following terms have
the following respective meanings:
(a) "Option" means any right, option or warrant to subscribe for, purchase
or otherwise acquire common stock or Convertible Securities.
(b) "Convertible Securities" means any evidences of indebtedness, shares of
stock or other securities directly or indirectly convertible into or
exchangeable for common stock.
(c) "Issue" means to grant, issue, sell, assume or fix a record date for
determining persons entitled to receive any security (including Options),
whichever of the foregoing is the first to occur.
(d) "Additional Common Shares" means all common stock (including reissued
shares) Issued (or deemed to be issued pursuant to Section 2) after the date of
the Warrant. Additional Common Shares does not include, however, any common
stock Issued in a transaction described in Sections 2.1 and 2.2 of the Warrant;
any common stock Issued upon conversion of preferred stock outstanding on the
date of the Warrant; the Shares; or common stock Issued as incentive or in a
nonfinancing transaction to employees, officers, directors or consultants to the
Company.
2. Deemed Issuance of Additional Common Shares. The shares of common stock
ultimately Issuable upon exercise of an Option (including the shares of common
stock ultimately Issuable upon conversion or exercise of a Convertible Security
Issuable pursuant to an Option) are deemed to be Issued when the Option is
Issued. The shares of common stock ultimately Issuable upon conversion or
exercise of a Convertible Security (other than a Convertible Security Issued
pursuant to an Option) shall be deemed Issued upon Issuance of the Convertible
Security. The maximum amount of common stock Issuable is determined without
regard to any future adjustments permitted under the instrument creating the
Options or Convertible Securities.
3. Adjustment of Warrant Price for Diluting Issuances.
3.1 Weighted Average Adjustment. If the Company issues Additional
Common Shares after the date of the Warrant and the consideration per Additional
Common Share (determined pursuant to Section 9 of this Rider) is less than the
Warrant Price in effect immediately before such Issue (a "Diluting Issuance"),
the Warrant Price in effect immediately before such Issue shall be reduced,
concurrently with such Issue, to a price (calculated to the nearest hundredth of
a cent) determined by multiplying the Warrant Price by a fraction:
(a) the numerator of which is the amount of common stock outstanding
immediately before such Issue plus the amount of common stock that the aggregate
consideration received by Company for the Additional Common Shares would
purchase at the Warrant Price in effect immediately before such Issue, and
(b) the denominator of which is the amount of common stock outstanding
immediately before such Issue plus the number of such Additional Common Shares.
Page 7 of 16 WARRANT
3.2 Adjustment of Number of Shares. Upon each adjustment of the
Warrant Price, the number of Shares Issuable upon exercise of the Warrant shall
be increased to equal the quotient obtained by dividing (a) the product
resulting from multiplying (i) the number of Shares Issuable upon exercise of
the Warrant and (ii) the Warrant Price, in each case as in effect immediately
before such adjustment, by (b) the adjusted Warrant Price.
3.3 Securities Deemed Outstanding. For the purpose of this Section 3,
all securities Issuable upon exercise of any outstanding Convertible Securities
or Options, Warrants, or other rights to acquire securities of the Company shall
be deemed to be outstanding.
4. No Adjustment for Issuances Following Deemed Issuances. No adjustment to the
Warrant Price shall be made upon the exercise of Options or conversion of
Convertible Securities.
5. Adjustment Following Changes in Terms of Options or Convertible Securities.
If the consideration payable to, or the amount of common stock Issuable by, the
Company increases or decreases, respectively, pursuant to the terms of any
outstanding Options or Convertible Securities, the Warrant Price shall be
recomputed to reflect such increase or decrease. The recomputation shall be made
as of the time of the Issuance of the Options or Convertible Securities. Any
changes in the Warrant Price that occurred after such Issuance because other
Additional Common Shares were Issued or deemed Issued shall also be recomputed.
6. Recomputation Upon Expiration of Options or Convertible Securities. The
Warrant Price computed upon the original Issue of any Options or Convertible
Securities, and any subsequent adjustments based thereon, shall be recomputed
when any Options or rights of conversion under Convertible Securities expire
without having been exercised. In the case of Convertible Securities or Options
for common stock, the Warrant Price shall be recomputed as if the only
Additional Common Shares Issued were the shares of common stock actually Issued
upon the exercise of such securities, if any, and as if the only consideration
received therefor was the consideration actually received upon the Issue,
exercise or conversion of the Options or Convertible Securities. In the case of
Options for Convertible Securities, the Warrant Price shall be recomputed as if
the only Convertible Securities Issued were the Convertible Securities actually
Issued upon the exercise thereof, if any, and as if the only consideration
received therefor was the consideration actually received by the Company
(determined pursuant to Section 9 of this Rider), if any, upon the Issue of the
Options for the Convertible Securities.
7. Limit on Readjustments. No readjustment of the Warrant Price pursuant to
Sections 5 or 6 of this Rider shall increase the Warrant Price more than the
amount of any decrease made in respect of the Issue of any Options or
Convertible Securities.
8. 30 Day Options. In the case of any Options that expire by their terms not
more than 30 days after the date of Issue thereof, no adjustment of the Warrant
Price shall be made until the expiration or exercise of all such Options.
9. Computation of Consideration. The consideration received by the Company for
the Issue of any Additional Common Shares shall be computed as follows:
(a) Cash shall be valued at the amount of cash received by the Corporation,
excluding amounts paid or payable for accrued interest or accrued dividends.
(b) Property. Property, other than cash, shall be computed at the fair
market value thereof at the time of the Issue as determined in good faith by the
Board of Directors of the Company.
Page 8 of 16 WARRANT
(c) Mixed Consideration. The consideration for Additional Common Shares
Issued together with other property of the Company for consideration that covers
both shall be determined in good faith by the Board of Directors.
(d) Options and Convertible Securities. The consideration per Additional
Common Share for Options and Convertible Securities shall be determined by
dividing:
(i) the total amount, if any, received or receivable by the Company
for the Issue of the Options or Convertible Securities, plus the minimum amount
of additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon exercise of the Options or
conversion of the Convertible Securities, by
(ii) the maximum amount of common stock (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such number) ultimately Issuable upon the
exercise of such Options or the conversion of such Convertible Securities.
[end of Rider]
Page 9 of 16 WARRANT
EXHIBIT C
REGISTRATION RIGHTS RIDER
(Rider to warrant for 250,000 shares of common stock of
Family Home Health Services Inc. issued on April 5, 2006 to Comerica Bank)
ARTICLE 1. Definitions. As used in this Registration Rights Rider, the following
terms have the following respective meanings:
1.1 The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and the declaration or ordering of effectiveness of such
registration statement or document.
1.2 The term "Registrable Securities" means (i) the Shares or all shares of
Common Stock of the Company issuable or issued upon conversion of the Shares and
(ii) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, any stock referred to in (i).
1.3 The terms "Holder" or "Holders" mean the Purchaser or qualifying transferees
under Article 8 hereof who hold Registrable Securities.
1.4 The term "SEC" means the Securities and Exchange Commission.
ARTICLE 2. Company Registration.
2.1 Registration. If at any time or from time to time, the Company shall
determine to register any of its securities, for its own account or the account
of any of its shareholders, other than a registration on Form S-1 or S-8
relating solely to employee stock option or purchase plans, or a registration on
Form S-4 relating solely to an SEC Rule 145 transaction, or a registration on
any other form (other than Form S-1, S-2, S-3 or S-18, or their successor forms)
or any successor to such forms, which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities, the Company will:
(a) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws); and
(b) include in such registration (and compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made within 30 days after receipt of such written
notice from the Company, by any Holder or Holders, except as set forth in
Section 2.2 below.
Neither the delivery of such notice by the Company nor of such request by
the Holder shall in any way obligate the Company to file such registration
statement and notwithstanding the filing of such registration statement, the
Company may terminate or withdraw any registrations initiated by it under this
Article 2 prior to the effectiveness of such registration whether or not a
Holder has elected to include securities in such registration, without liability
to the Holder, except that the Company shall pay expenses as are contemplated to
be paid by it pursuant to Article 3.
Page 10 of 16 WARRANT
2.2 Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Sub-Section
2.1(a). In such event the right of any Holder to registration pursuant to this
Sub-Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other shareholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
2.3 Underwriter Limitations. In the case of any registration of securities by
the Company, if the managing underwriters give written advice to the Company
that marketing factors require a limitation on the number of shares of Common
Stock (or other securities convertible into or exercisable or exchangeable for
Common Stock) to be offered and sold by stockholders of Company in such
offering, then the Company shall be required to include in the offering only
that number of such securities, if any, that the underwriters determine in their
sole discretion will not impair the success of the offering (any securities so
included to be apportioned pro rata among Holders and stockholders of the
Company having contractual rights to include shares in such registration, based
upon the number of shares of Common Stock each Holder and each such stockholder
beneficially owns).
2.4 No holder of Registrable Securities shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Article 2.
ARTICLE 3. Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to this Rider including
without limitation, all registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for the Company and expenses of any
special audits incidental to or required by such registration, shall be borne by
the Company except the Company shall not be required to pay underwriters' fees,
discounts or commissions relating to Registrable Securities. All expenses of any
registered offering not otherwise borne by the Company shall be borne pro rata
among the Holders participating in the offering and the Company.
ARTICLE 4. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep each Holder participating
therein advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. Except as
otherwise provided in Article 3, at its expense the Company will:
4.1 Prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective, and, upon the request of the Holders of a
majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to 120 days.
4.2 Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
4.3 Furnish to the Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
Page 11 of 16 WARRANT
4.4 Use its best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
4.5 In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
4.6 Notify each Holder of Registrable Securities covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act or the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
ARTICLE 5. Indemnification.
5.1 The Company will indemnify each Holder of Registrable Securities and each of
its officers, directors and partners, and each person controlling such Holder,
with respect to which such registration, qualification or compliance has been
effected pursuant to this Rights Agreement, and each underwriter, if any, and
each person who controls any underwriter of the Registrable Securities held by
or issuable to such Holder, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, or any violation or
alleged violation by the Company of the Securities Act, the Securities Exchange
Act of 1934, as amended, ("Exchange Act") or any state securities law applicable
to the Company or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any such state law and relating to action or inaction
required of the Company in connection with any such registration, qualification
of compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, within a
reasonable amount of time after incurred for any reasonable legal and any other
expenses incurred in connection with investigating, defending or settling any
such claim, loss, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 5.1 shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld); and provided further, that the Company will not
be liable in any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter specifically for use therein.
5.2 Each Holder will, if Registrable Securities held by or issuable to such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person controlling
such Holder, and its attorneys and accounts, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue
Page 12 of 16 WARRANT
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder
specifically for use therein; provided, however, that the indemnity agreement
contained in this Section 5.2 shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Holder, (which consent shall not be unreasonably
withheld); and provided further, that the total amount for which any Holder
shall be liable under this Section 5.2 shall not in any event exceed the
aggregate proceeds received by such Holder from the sale of Registrable
Securities held by such Holder in such registration.
5.3 Each party entitled to indemnification under this Article 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided further, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in prejudice to the
Indemnifying Party; and provided further, that an Indemnified Party (together
with all other Indemnified Parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
Page 13 of 16 WARRANT
ARTICLE 6. Information by Holder. Any Holder or Holders of Registrable
Securities included in any registration shall promptly furnish to the Company
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to herein. In its request for this information, the Company shall
specify a reasonable time period of not fewer than 15 nor more than 30 days in
which Holder must provide the Company with that information in writing. If
Holder does not provide that information in writing to Company within such time
period, then the Company may proceed to file the registration statement without
including the Registrable Securities thereunder.
ARTICLE 7. Rule 144 Reporting. With a view to making available to Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees at all times to:
7.1 make and keep public information available, as those terms are understood
and defined in SEC Rule 144, after 90 days after the effective date of the first
registration filed by the Company for an offering of its securities to the
general public;
7.2 file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements); and
7.3 so long as a Holder owns any Registrable Securities, to furnish to such
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as the Holder may reasonably request in complying with any rule or
regulation of the SEC allowing the Holder to sell any such securities without
registration.
ARTICLE 8. Transfer of Registration Rights. Holders' rights to cause the Company
to register their securities and keep information available, granted to them by
the Company under Articles 2 and 7 may be assigned to a transferee or assignee
of a Holder's Registrable Securities not sold to the public, provided, that the
Company is given written notice by such Holder at the time of or within a
reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned. The Company may prohibit the transfer of
any Holders' rights under this Article 8 to any proposed transferee or assignee
who the Company reasonably believes is a competitor of the Company.
ARTICLE 9. Waivers and Amendments. With the written consent of the record or
beneficial holders of at least a majority of the Registrable Securities, the
obligations of the Company and the rights of the Holders of the Registrable
Securities under this agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however, that no such modification, amendment or waiver shall reduce
the aforesaid percentage of Registrable Securities without the consent of all of
the Holders of the Registrable Securities. Upon the effectuation of each such
waiver, consent, agreement of amendment or modification, the Company shall
promptly give written notice thereof to the record holders of the Registrable
Securities who have not previously
Page 14 of 16 WARRANT
consented thereto in writing. This Agreement or any provision hereof may be
changed, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, except to the extent provided in this Article 9.
ARTICLE 10. "Market Stand-Off" Agreement. Each Holder agrees that it will not,
without the prior written consent of the managing underwriter, if any, of any
registration effected pursuant to Article 2, lend, offer, pledge, sell, contract
to sell, sell any option or warrant to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any Registrable Securities, or of any
other equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (other than
as part of such underwritten public offering) during the time period reasonably
requested by the managing underwriter, not to exceed 90 days, or in the case of
an initial public offering, 180 days
[end of Rider]
Page 15 of 16 WARRANT
EXHIBIT D
(Rider to warrant for 250,000 shares of common stock of
Family Home Health Services Inc. issued on April 5, 2006 to Comerica Bank)
CAPITALIZATION TABLE
Page 16 of 16 WARRANT