Exhibit 4.2
FORM OF WARRANT
[THE FOLLOWING PARAGRAPH SHALL APPEAR ON THE FACE OF EACH RESTRICTED WARRANT:]
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED AND APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION THEREFROM.
ATS MEDICAL, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: __________ Number of Shares: __________
CUSIP No.: ____________ (subject to adjustment)
Date of Issuance: October 7, 2005
ATS Medical, Inc., a Minnesota corporation (the "Company"), hereby
certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, ________________, the registered holder hereof
or its permitted assigns is entitled, subject to the terms and conditions set
forth below, to purchase from the Company upon surrender of this Warrant (as
defined below), at any time or times on or after the date hereof, but not after
5:00 p.m., Eastern Standard Time, on the Expiration Date (as defined below),
_________________ fully paid nonassessable shares of Common Stock (as defined
below) of the Company at the Exercise Price per share provided in Section 1(c)
of this Warrant, subject to adjustment as provided below. Capitalized terms used
herein but not defined shall have the same meanings assigned to them in the
Securities Purchase Agreement dated as of October 6, 2005, by and between the
Company and the parties listed on the Schedule of Buyers attached thereto as
Exhibit A (as such agreement may be amended, supplemented and modified from time
to time as provided in such agreement, the "Securities Purchase Agreement").
This Warrant (as defined below) is one of a series of Warrants issued in
connection with the transactions described in (i) the Securities Purchase
Agreement and (ii) certain other related documents and agreements including,
without limitation, the Transaction Documents (as defined in the Securities
Purchase Agreement). The Warrant Shares (as defined below) issued upon exercise
of this Warrant and the holder hereof and thereof shall be entitled to all of
the rights and privileges set forth in the Transaction Documents. The Warrants
are issued under and pursuant to a Warrant Agent Agreement dated as of October
7, 2005 (herein called the "Warrant Agent Agreement"), between the Company and
Wells Fargo Bank, National Association (herein called the "Warrant Agent").
SECTION 1. DEFINITIONS. The following terms as used in this Warrant shall
have the following meanings:
(a) "Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in the City of New York are required by law to remain
closed.
(b) "Common Stock" means (i) the common stock, $0.01 par value per share,
of the Company, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
(c) "Exercise Price" shall be equal to $4.40, subject to further adjustment
as hereinafter provided.
(d) "Expiration Date" means October 15, 2010 or, if such date does not fall
on a Business Day or on a Trading Day, then the next Business Day.
(e) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or association and a government or any department or agency
thereof.
(f) "Principal Market" means The Nasdaq National Market ("NASDAQ") or if
the Common Stock is not traded on NASDAQ, then the principal securities exchange
or trading market for the Common Stock.
(g) "Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of October 7, 2005, among the Company, Piper Jaffray & Co.
and the initial purchasers of the Notes and the Warrants as such agreement may
be amended, supplemented and modified from time to time in a writing signed by
all of the signatories thereto.
(h) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
(i) "Shelf Registration Statement" means the Shelf Registration Statement
contemplated by the Registration Rights Agreement.
(i) "Trading Day" shall mean (x) a day on which the Principal Market is
open for business or (y) if the applicable security is not so listed on a
Principal Market or admitted for trading or quotation, a Business Day.
(j) "Warrant" means this Warrant and the other warrants to purchase shares
of Common Stock issued pursuant to the Securities Purchase Agreement and all
warrants issued in exchange, transfer or replacement thereof.
(k) "Warrant Shares" means all shares of Common Stock issuable upon
exercise of the Warrants.
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SECTION 2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 5:00 p.m., Eastern Time, on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto or a reasonable facsimile
thereof (the "Exercise Notice"), to the Company at the principal corporate trust
office of the Warrant Agent and to the Company's designated transfer agent (the
"Transfer Agent"), of such holder's election to exercise all or a portion of
this Warrant, which notice shall specify the number of Warrant Shares to be
purchased, (ii) (A) payment to the Warrant Agent of an amount equal to the
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the "Aggregate Exercise Price") in cash or delivery
of a certified check or bank draft payable to the order of the Warrant Agent or
wire transfer of immediately available funds or (B) notification to the Company
at the principal corporate trust office of the Warrant Agent and to the Transfer
Agent that this Warrant is being exercised pursuant to a Cashless Exercise (as
defined in Section 2(e) of this Warrant), and (iii) the surrender of this
Warrant to a common carrier for overnight delivery to the Warrant Agent as soon
as practicable following delivery of the Exercise Notice (or an indemnification
undertaking or other form of security reasonably satisfactory to the Company
with respect to this Warrant in the case of its loss, theft or destruction, or
an affidavit of lost Warrant, in accordance with Section 11); provided, however,
that if such Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 8 of this Warrant shall be applicable. In the event of
any exercise of the rights represented by this Warrant in compliance with this
Section 2(a), the Company shall use its best efforts on or before the third
Business Day, but in no event later than the fifth Business Day (the "Warrant
Share Delivery Date") following the date of receipt by the Warrant Agent of the
Exercise Notice, the Aggregate Exercise Price (or notice of Cashless Exercise)
and this Warrant (or an indemnification undertaking or other form of security
reasonably satisfactory to the Company with respect to this Warrant in the case
of its loss, theft or destruction, or an affidavit of lost Warrant, in
accordance with Section 11) (the "Exercise Delivery Documents"), (A) in the case
of a public resale of such Warrant Shares, at the holder's request, to credit
such aggregate number of shares of Common Stock to which the holder shall be
entitled to the holder's or its designee's balance account with The Depository
Trust Company ("DTC") through its Deposit Withdrawal Agent Commission system or
(B) to issue and deliver to the address as specified in the Exercise Notice, a
certificate or certificates in such denominations as may be requested by the
holder in the Exercise Notice, registered in the name of the holder or its
designee, for the number of shares of Common Stock to which the holder shall be
entitled upon such exercise. Upon delivery of the Exercise Delivery Documents,
the holder of this Warrant shall be deemed for all corporate purposes to have
become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date of delivery of this Warrant
as required by clause (iii) above or the certificates evidencing such Warrant
Shares. In the case of a dispute as to the determination of the Exercise Price
or the arithmetic calculation of the number of Warrant Shares, the Company shall
promptly issue to the holder the number of shares of Common Stock that is not
disputed and shall submit the disputed determination or arithmetic calculation
to the holder via facsimile within two (2) Business Days after receipt of the
holder's Exercise Notice. If the holder and the Company are unable to agree upon
the determination of the Exercise Price or arithmetic
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calculation of the number of Warrant Shares within two (2) Business Days of such
disputed determination or arithmetic calculation being submitted to the holder,
then the Company shall immediately submit via facsimile (i) the disputed
determination of the Exercise Price or the Closing Price (as defined in Section
9(f) of this Warrant) to an independent, reputable investment banking firm
selected jointly by the Company and the holder or (ii) the disputed arithmetic
calculation of the number of Warrant Shares to its independent, outside auditor.
The Company shall cause the investment banking firm or the auditor, as the case
may be, to perform the determination or calculation and notify the Company and
the holder of the results no later than ten (10) Business Days from the time it
receives the disputed determination or calculation. Such investment banking
firm's or auditor's determination or calculation, as the case may be, shall be
deemed conclusive absent manifest error. All fees and expenses of such
determinations shall be borne solely by the Company.
(b) Unless the rights represented by this Warrant shall have expired or
shall have been fully exercised, the Company shall, as soon as practicable but
in no event later than five (5) Business Days after any exercise (the "Warrant
Delivery Date") and at its own expense, issue a new Warrant identical in all
respects to this Warrant exercised except it shall represent rights to purchase
the number of Warrant Shares purchasable immediately prior to such exercise
under this Warrant, less the number of Warrant Shares with respect to which this
Warrant is exercised.
(c) Notwithstanding anything contained in this Warrant to the contrary, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of this Warrant or to distribute certificates which evidence such
fractional shares. If more than one Warrant shall be presented for exercise in
full at the same time by the same holder, the number of full shares of Common
Stock which shall be issuable upon the exercise thereof shall be computed on the
basis of the aggregate number of shares of Common Stock purchasable on exercise
of all Warrants so presented. In lieu of any fractional shares, there shall be
paid to the holder an amount of cash equal to the same fraction of the current
market value of a share of Common Stock. For purposes of this Section 2(c) of
this Warrant, the current market value of a share of Common Stock shall be the
Closing Price of a share of Common Stock for the Trading Day immediately prior
to the date of such exercise or if not listed on a Principal Market, then as
determined in good faith by a majority of the Company's Board of Directors,
whose determination shall be final, binding and conclusive.
(d) If the Company shall fail for any reason or for no reason (except in
the case of a dispute as to the Exercise Price or the Closing Price which is
being resolved in accordance with Section 2(a) of this Warrant) to issue to the
holder within five (5) Business Days of receipt of the Exercise Delivery
Documents, a certificate for the number of shares of Common Stock to which the
holder is entitled or to credit the holder's or its designee's balance account
with DTC, in accordance with Section 2 of this Warrant, for such number of
shares of Common Stock to which the holder is entitled upon the holder's
exercise of this Warrant or a new Warrant for the number of shares of Common
Stock to which such holder is entitled pursuant to Section 2(b) of this Warrant,
the Company shall, in addition to any other remedies under this Warrant or the
Securities Purchase Agreement or otherwise available to such holder, including
any indemnification under Section 8 of the Securities Purchase Agreement, pay as
additional damages in cash to such holder on each day after the Warrant Share
Delivery Date if such exercise is not timely effected and each day after the
Warrant Delivery Date if such Warrant is
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not delivered, as the case may be, an amount equal to one-half percent (0.5%)
per month multiplied by the sum of (I) the product of the number of shares of
Common Stock not issued to the holder on or prior to the Warrant Share Delivery
Date and the Closing Price of the Common Stock on the Warrant Share Delivery
Date and (II) the product of the number of shares of Common Stock issuable upon
exercise of any Warrant not delivered on or prior to the Warrant Delivery Date
and to which such holder is entitled and the Closing Price of the Common Stock,
on the Warrant Delivery Date, provided that if the Common Stock is not listed on
a Principal Market, then the Closing Price shall be as determined in good faith
by a majority of the Company's Board of Directors, whose determination shall be
final, binding and conclusive.
(e) Notwithstanding anything contained herein to the contrary, the holder
of this Warrant may, at its election exercised in its sole discretion, exercise
this Warrant as to all or a portion of the Warrant Shares and, in lieu of making
the cash payment otherwise contemplated to be made to the Company upon such
exercise in payment of the Aggregate Exercise Price, elect instead to receive
upon such exercise the "Net Number" of shares of Common Stock determined
according to the following formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A = the total number of shares with respect to which this Warrant is
then being exercised.
B = the Closing Price of the Common Stock on the Trading Day
immediately preceding the date of the Exercise Notice.
C = the Exercise Price then in effect for the applicable Warrant
Shares at the time of such exercise.
(f) [INCLUDE THE FOLLOWING PARAGRAPH ONLY IF HOLDER HAS ELECTED TO BE
GOVERNED BY SECTION 2(k)(A) OF THE SECURITIES PURCHASE AGREEMENT:] [The
registered holder hereby agrees that in no event will it exercise any of the
Warrants in excess of the number of such Warrants upon the exercise of which (x)
the number of shares of Common Stock beneficially owned by such holder (other
than the shares which would otherwise be deemed beneficially owned except for
being subject to a limitation on exercise analogous to the limitation contained
in this Section 2(f)) plus (y) the number of shares of Common Stock issuable
upon the exercise of such Warrants, would be equal to or exceed 9.99% of the
number of shares of Common Stock then issued and outstanding (after giving
effect to such exercise), it being the intent of the Company and the holder that
the holder not be deemed at any time to have the power to vote or dispose of
greater than 9.99% of the number of shares of Common Stock issued and
outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). To the extent that the limitation contained in this
Section 2(f) applies (and without limiting any rights the Company may otherwise
have), the Company may rely on the registered holder's determination of whether
the Warrants are exercisable pursuant to
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the terms hereof, the Company having no obligation whatsoever to verify or
confirm the accuracy of such determination, and the submission of the Exercise
Notice by the holder shall be deemed to be the holder's representation that the
Warrants specified therein are exercisable pursuant to the terms hereof. Nothing
contained herein shall be deemed to restrict the right of a Holder to exercise
the Warrants at such time as the exercise thereof will not violate the
provisions of this Section 2(f).]
[INCLUDE THE FOLLOWING PARAGRAPH ONLY IF HOLDER HAS ELECTED TO BE GOVERNED
BY SECTION 2(k)(B) OF THE SECURITIES PURCHASE AGREEMENT:] [The registered holder
hereby agrees that in no event will it exercise any of the Warrants in excess of
the number of such Warrants upon the exercise of which (x) the number of shares
of Common Stock beneficially owned by such holder (other than the shares which
would otherwise be deemed beneficially owned except for being subject to a
limitation on exercise analogous to the limitation contained in this Section
2(f)) plus (y) the number of shares of Common Stock issuable upon the exercise
of such Warrants, would be equal to or exceed 4.99% of the number of shares of
Common Stock then issued and outstanding (after giving effect to such exercise),
it being the intent of the Company and the holder of Warrants that the holder
not be deemed at any time to have the power to vote or dispose of greater than
4.99% of the number of shares of Common Stock issued and outstanding. As used
herein, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
To the extent that the limitation contained in this Section 2(f) applies (and
without limiting any rights the Company may otherwise have), the Company may
rely on the registered holder's determination of whether the Warrants are
exercisable pursuant to the terms hereof, the Company having no obligation
whatsoever to verify or confirm the accuracy of such determination, and the
submission of the Exercise Notice by the holder shall be deemed to be the
holder's representation that the Warrants specified therein are exercisable
pursuant to the terms hereof. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise the Warrants at such time as the
exercise thereof will not violate the provisions of this Section 2(f).]
SECTION 3. DATE; DURATION. The date of this Warrant is October 7, 2005 (the
"Warrant Date"). This Warrant, in all events, shall be wholly void and of no
effect at 5:00 pm, Eastern Standard Time, on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 8(c) of
this Warrant shall continue in full force and effect after such date as to any
Warrant Shares or other securities issued upon the exercise of this Warrant.
SECTION 4. COVENANTS AS TO COMMON STOCK. The Company hereby covenants and
agrees as follows:
(a) Issuance of Warrants and Warrant Shares. This Warrant is, and any
Warrants issued in substitution for or replacement of this Warrant will, upon
issuance, be, validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof, and shall not be
subject to preemptive rights or other similar rights of shareholders of the
Company. All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance and payment hereof or Cashless
Exercise in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all preemptive and similar rights and all taxes,
liens and charges created by or through the
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Company with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
(b) Reservation of Shares. During the period within which the rights
represented by this Warrant may be exercised, the Company will take all actions
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than one hundred five percent (105%) of the number
of shares of Common Stock needed to provide for the issuance of the Warrant
Shares upon exercise of all of the Warrants without regard to any limitations on
conversions or exercise.
(c) Listing. The Company shall promptly use reasonable best efforts to
secure the listing of the shares of Common Stock issuable upon exercise of this
Warrant upon each national securities exchange and automated quotation system,
if any, upon which shares of Common Stock are then listed (subject to official
notice of issuance upon exercise of this Warrant) and shall use reasonable best
efforts to maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all shares of Common Stock issuable from time to time
upon the exercise of this Warrant; and the Company shall use reasonable best
efforts to list on the Principal Market or automated quotation system, as the
case may be, and shall use reasonable best efforts to maintain such listing of,
any other shares of capital stock of the Company issuable upon the exercise of
this Warrant if and so long as any shares of the same class shall be listed on
such Principal Market or automated quotation system. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 4(c).
(d) Certain Actions. The Company will not, by amendment of its Articles of
Incorporation or through any 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 by it hereunder. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock issuable upon the exercise of this Warrant above the Exercise Price
then in effect, (ii) will take all such actions as may be reasonably necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of this Warrant
and (iii) will not take any action which results in any adjustment of the
Exercise Price if the total number of shares of Common Stock issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock then authorized by the Company's Articles of
Incorporation and available for the purpose of issue upon such exercise.
(e) Obligations Binding on Successors. This Warrant will be binding upon
any entity succeeding to the Company in one or a series of transactions by
merger, consolidation or acquisition of all or substantially all of the
Company's assets or other similar transactions.
SECTION 5. TAXES.
(a) The Company shall pay any and all documentary, stamp, transfer and
other similar taxes which may be payable with respect to the issuance and
delivery of Warrant Shares upon exercise of this Warrant.
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(b) Notwithstanding any other provision of this Warrant or any other
Transaction Document, for income tax purposes, any assignee or transferee shall
agree that the Company and the Company's Transfer Agent shall be permitted to
withhold from any amounts payable to such assignee or transferee any taxes
required by law to be withheld from such amounts. Unless exempt from the
obligation to do so, each assignee or transferee shall execute and deliver to
the Company or the Transfer Agent, as applicable, a properly completed Form W-8
or W-9, indicating that such assignee or transferee is not subject to back-up
withholding for United States Federal income tax purposes. Each assignee or
transferee that does not deliver such a form pursuant to the preceding sentence
shall have the burden of proving to the Company's reasonable satisfaction that
it is exempt from such requirement.
SECTION 6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as otherwise
specifically provided herein, prior to the exercise of the Warrants represented
hereby, the holder of this Warrant shall not be entitled, as such, to any rights
of a shareholder of the Company, including, without limitation, the right to
vote or to consent to any action of the shareholders of the Company, to receive
dividends or other distributions, to exercise any preemptive right or to receive
any notice of meetings of shareholders of the Company, and shall not be entitled
to receive any notice of any proceedings of the Company. In addition, nothing
contained in this Warrant shall be construed as imposing any liabilities on such
holder to purchase any securities (upon exercise of this Warrant or otherwise)
or as a shareholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company.
SECTION 7. COMPLIANCE WITH SECURITIES LAWS.
(a) The holder of this Warrant, by the acceptance hereof, represents and
warrants that (i) it is acquiring this Warrant and (ii) upon exercise of this
Warrant will acquire the Warrant Shares then issuable upon exercise thereof for
its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the Securities Act; provided, however, that by
making the representations herein, the holder does not agree to hold this
Warrant or any of the Warrant Shares for any minimum or other specific term and
reserves the right to dispose of this Warrant and the Warrant Shares at any time
in accordance with or pursuant to a registration statement or an exemption under
the Securities Act. The holder of this Warrant further represents, by acceptance
hereof, that, as of this date, such holder is an "accredited investor" as such
term is defined in Rule 501(a) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act and was not organized for the
specific purpose of acquiring the Warrants or Warrant Shares.
(b) This Warrant and all the Warrant Shares issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form
(in addition to any legend required by state securities laws or any securities
exchange upon which such Warrant Shares may, at the time of such exercise, be
listed) on the face thereof unless at the time of exercise such Warrant Shares
shall be registered under the Securities Act:
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THE
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SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
THEREFROM.
The legend set forth above shall be removed and the Company shall direct
the Agent (in the case of Warrants) to issue a new Warrant or Warrant(s) of like
tenor and exercisable for the same number of Warrant Shares, or the Transfer
Agent (in the case of Warrant Shares) to issue a certificate or certificates
representing Warrant Shares, as appropriate, without such legends to the holder
of the Warrant(s) or Warrant Shares upon which they are stamped, (i) if such
Warrant(s) or Warrant Shares are registered for resale under the Securities Act
and are transferred or sold pursuant to such registration, (ii) if, pursuant to
a sale transaction, such holder provides the Company with an opinion of counsel
reasonably acceptable to the Company to the effect that a public sale,
assignment or transfer of the Warrant(s) or Warrant Shares may be made without
registration under the Securities Act, or (iii) if the holder of the Securities
has not been an "affiliate" (as defined in Rule 501(b) of Regulation D under the
Securities Act) during the preceding three (3) months, upon expiration of the
two- (2) year period under Rule 144(k) promulgated under the Securities Act (or
any successor rule). In the event Rule 144(k) (or any successor rule) is amended
to change the two- (2) year or three- (3) month periods, the reference(s) in the
preceding sentence shall be deemed to be a reference to such changed period(s),
provided that such change shall not become effective if it is otherwise
prohibited by, or would otherwise cause a violation of, the then applicable
federal securities laws. The Company shall not require such opinion of counsel
for the sale of Warrant(s) or Warrant Shares in accordance with Rule 144 of the
Securities Act, provided the seller provides such representations that the
Company shall reasonably request confirming compliance with the requirements of
Rule 144. Notwithstanding the foregoing, the Company agrees that it will issue
stock certificates representing Warrant Shares without the legends shown above
in this Section 7(b) if, at the time of such issuance, (i) such Shares are
registered for resale under the Securities Act pursuant to an effective
registration statement filed by the Company, and (ii) the holder to whom such
Shares are to be issued has provided representations to the Company, in a form
reasonably acceptable to the Company, to the effect that such Shares will only
be sold either in accordance with the requirements for sale pursuant to such
registration statement, including the prospectus delivery requirement, or in
accordance with the provisions of Rule 144.
SECTION 8. OWNERSHIP AND TRANSFER.
(a) The Company shall cause the Warrant Agent to maintain at its principal
corporate trust office (or such office or agency of the Company as the Company
may designate by notice to the holder hereof), a register for this Warrant (the
"Warrant Register"), in which the Warrant Agent shall record the name and
address of the Person in whose name this Warrant has been issued, as well as the
name and address of each transferee. The Company may treat the Person in whose
name any Warrant is registered on the Warrant Register as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, but in all
events recognizing any transfers made in accordance with the terms of this
Warrant.
(b) This Warrant and all rights hereunder shall be assignable and
transferable by the holder hereof without the consent of the Company upon
surrender of this Warrant with a
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properly executed assignment (in the form of Exhibit B attached hereto) at the
principal corporate trust office of the Warrant Agent (or such office or agency
of the Company as the Company may designate in writing to the holder hereof).
(c) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Registration Rights Agreement. The
Warrant Shares shall constitute Registrable Securities (as such term is defined
in the Registration Rights Agreement). Each holder of this Warrant shall be
entitled to all of the benefits afforded to a holder of any such Registrable
Securities under the Registration Rights Agreement and such holder, by its
acceptance of this Warrant, agrees and shall agree to be bound by and to comply
with the terms and conditions of the Registration Rights Agreement applicable to
such holder as a holder of such Registrable Securities.
SECTION 9. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES ISSUABLE. The
Exercise Price, the number of Warrant Shares issuable upon the exercise of each
Warrant and the number of Warrants outstanding are subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 9.
(a) In case the Company shall hereafter pay a dividend in shares of Common
Stock, or make a distribution of shares of Common Stock, to all holders of the
outstanding Common Stock, the Exercise Price in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Exercise Price by a fraction of which (i) the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the Record Date (as defined in Section 9(f) of this Warrant)
fixed for such determination and (ii) the denominator shall be the sum of such
number of shares and the total number of shares constituting such dividend or
other distribution, such reduction in the Exercise Price to become effective
immediately after the opening of business on the day following the Record Date.
If any dividend or distribution of the type described in this Section 9(a) of
this Warrant is declared but not so paid or made, the Exercise Price shall again
be adjusted to the Exercise Price which would then be in effect if such dividend
or distribution had not been declared.
(b) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Exercise Price in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(c) In case the Company shall issue rights or warrants to all or
substantially all holders of its outstanding shares of Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 9(f) of this Warrant)
on the Record Date fixed for the determination of shareholders entitled to
receive such rights or warrants, the Exercise Price shall be adjusted so that
the same
10
shall equal the price determined by multiplying the Exercise Price in effect at
the opening of business on the date after such Record Date by a fraction (i) the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the Record Date plus the number of
shares that the aggregate offering price of the total number of shares so
offered for subscription or purchase would purchase at such Current Market Price
and (ii) the denominator of which shall be the sum of the number of shares of
Common Stock outstanding at the close of business on the Record Date plus the
total number of additional shares of Common Stock so offered for subscription or
purchase. Such adjustment shall become effective immediately after the opening
of business on the day following the Record Date fixed for determination of
shareholders entitled to receive such rights or warrants. To the extent that
shares of Common Stock are not delivered pursuant to such rights or warrants,
upon the expiration or termination of such rights or warrants, the Exercise
Price shall be readjusted to the Exercise Price that would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued, the
Exercise Price shall again be adjusted to be the Exercise Price that would then
be in effect if such date fixed for the determination of shareholders entitled
to receive such rights or warrants had not been fixed. In determining whether
any rights or warrants entitle the holders to subscribe for or purchase shares
of Common Stock at less than the Current Market Price, and in determining the
aggregate offering price of such shares of Common Stock, there shall be taken
into account any consideration received for such rights or warrants, the value
of such consideration, if other than cash, to be determined in good faith by the
Company's Board of Directors.
(d) In case the Company shall, by dividend or otherwise, distribute to all
or substantially all holders of its Common Stock shares of any class of capital
stock of the Company (other than any dividends or distributions to which Section
9(a) of this Warrant applies) or evidences of its indebtedness or other assets
(including securities, but excluding (1) any rights or warrants referred to in
Section 9(c) of this Warrant and (2) dividends and distributions paid
exclusively in cash (except as set forth in Sections 9(e) and 9(f) of this
Warrant (the foregoing hereinafter in this Section 9(d) called the
"Securities")), unless the Company elects to reserve such Securities for
distribution to the holders upon exercise of the Warrants so that any such
holder converting Warrants will receive upon such exercise, in addition to the
shares of Common Stock to which such holder is entitled, the amount and kind of
such Securities which such holder would have received if such holder had
exercised its Warrants into Common Stock immediately prior to the Record Date
for such distribution of the Securities, then, in each such case, the Exercise
Price shall be reduced so that the same shall be equal to the price determined
by multiplying the Exercise Price in effect immediately prior to the close of
business on the Record Date with respect to such distribution by a fraction (i)
the numerator of which shall be the Current Market Price (as defined in Section
9(f) of this Warrant) on such date less the fair market value (as determined in
good faith by the Company's Board of Directors, whose determination shall be
conclusive) on such date of the portion of the Securities so distributed
applicable to one share of Common Stock (determined on the basis of the number
of shares of Common Stock outstanding on the Record Date) and (ii) the
denominator of which shall be such Current Market Price, such reduction to
become effective immediately prior to the opening of business on the day
following the Record Date; provided, however, that in the event the then fair
market value (as determined in good faith by the Company's Board of Directors,
whose determination shall be conclusive) of the portion of the Securities so
distributed applicable to one
11
share of Common Stock is equal to or greater than the Current Market Price on
the Record Date, in lieu of the foregoing adjustment, adequate provision shall
be made so that each holder shall have the right to receive upon conversion of a
Warrant (or any portion thereof) the amount of Securities such holder would have
received had such holder converted such Warrant (or portion thereof) immediately
prior to such Record Date.
In the event that such dividend or distribution is not so paid or made, the
Exercise Price shall again be adjusted to be the Exercise Price which would then
be in effect if such dividend or distribution had not been declared. If the
Company's Board of Directors determines the fair market value of any
distribution for purposes of this Section 9(d) by reference to the actual or
when issued trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market over the
same period (the "Reference Period") used in computing the Current Market Price
pursuant to Section 9(f) of this Warrant to the extent possible, unless the
Company's Board of Directors determines in good faith that determining the fair
market value during the Reference Period would not be in the best interest of
the holders.
In the event that the Company implements a shareholder rights plan, such
rights plan shall provide that upon exercise of the Warrants the holders will
receive, in addition to the Common Stock issuable upon such exercise, the rights
issued under such rights plan (as if the holder had exercised the Warrant prior
to implementing the rights plan and notwithstanding the occurrence of an event
causing such rights to separate from the Common Stock at or prior to the time of
exercise). Any distribution of rights or warrants pursuant to a shareholder
rights plan complying with the requirements set forth in the immediately
preceding sentence of this paragraph shall not constitute a distribution of
rights or warrants for the purposes of this Section 9(d).
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"), (i) are deemed to be transferred with such shares of Common
Stock, (ii) are not exercisable, and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 9(d) (and no adjustment to the Exercise Price under
this Section 9(d) will be required) until the occurrence of the earliest Trigger
Event. If such right or warrant is subject to subsequent events, upon the
occurrence of which such right or warrant shall become exercisable to purchase
different securities, evidences of indebtedness or other assets or entitle the
holder to purchase a different number or amount of the foregoing or to purchase
any of the foregoing at a different purchase price, then the occurrence of each
such event shall be deemed to be the date of issuance and record date with
respect to a new right or warrant (and a termination or expiration of the
existing right or warrant without exercise by the holder thereof). In addition,
in the event of any distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in the preceding
sentence) with respect thereto, that resulted in an adjustment to the Exercise
Price under this Section 9(d), (1) in the case of any such rights or warrants
that shall all have been redeemed or repurchased without exercise by any holders
thereof, the Exercise Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of
12
Common Stock with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all holders of Common Stock as of the
date of such redemption or repurchase, and (2) in the case of such rights or
warrants all of which shall have expired or been terminated without exercise,
the Exercise Price shall be readjusted as if such rights and warrants had never
been issued.
For purposes of this Section 9(d) and Sections 9(a) and (c) of this
Warrant, any dividend or distribution to which this Section 9(d) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which Section 9(a) or (c) of this
Warrant applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital stock,
rights or warrants other than such shares of Common Stock or rights or warrants
to which Section 9(c) of this Warrant applies (and any Exercise Price reduction
required by this Section 9(d) with respect to such dividend or distribution
shall then be made) immediately followed by (2) a dividend or distribution of
such shares of Common Stock or such rights or warrants (and any further Exercise
Price reduction required by Sections 9(a) and (c) of this Warrant with respect
to such dividend or distribution shall then be made), except (A) the Record Date
of such dividend or distribution shall be substituted as "the date fixed for the
determination of shareholders entitled to receive such dividend or other
distribution," "Record Date fixed for such determination" and "Record Date"
within the meaning of Section 9(a) of this Warrant and as "the date fixed for
the determination of shareholders entitled to receive such rights or warrants,"
"the Record Date fixed for the determination of the shareholders entitled to
receive such rights or warrants" and "such Record Date" within the meaning of
Section 9(c) of this Warrant and (B) any shares of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of Section
9(a) of this Warrant.
(e) Subject to the provisions of Section 9(i), in case the Company shall,
by dividend or otherwise, distribute to all or substantially all holders of its
Common Stock cash (excluding any cash that is distributed upon a merger or
consolidation to which Section 10 of this Warrant applies or as part of a
distribution referred to in Section 9(d) of this Warrant), the Exercise Price
shall be reduced so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the close of
business on the Record Date with respect to such distribution by a fraction (i)
the numerator of which shall be equal to the Current Market Price on the Record
Date less an amount equal to the quotient of (x) the amount of such cash
distributed to all holders of its Common Stock, and (y) the number of shares of
Common Stock outstanding on the Record Date and (ii) the denominator of which
shall be equal to the Current Market Price on such date; provided, however, that
in the event the portion of the cash so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price of the Common
Stock on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder shall have the right to receive upon
exercise of a Warrant (or any portion thereof) the amount of cash such holder
would have received had such holder exercised such Warrant (or portion thereof)
immediately prior to such Record Date. In the event that such dividend or
distribution is not so paid or made, the Exercise Price shall again be adjusted
to be the Exercise Price that would then be in effect if such dividend or
distribution had not been declared.
13
(f) For purposes of this Section 9, the following terms shall have the
meanings indicated:
(1) "Closing Price" with respect to any securities on any day shall
mean the closing sale price regular way on such day or, in case no such sale
takes place on such day, the average of the reported closing bid and asked
prices, regular way, in each case on the Nasdaq National Market or New York
Stock Exchange, as applicable, or, if such security is not listed or admitted to
trading on such National Market or Exchange, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such manner as
furnished by any New York Stock Exchange member firm selected from time to time
by the Board of Directors for that purpose, whose determination shall be
conclusive.
(2) "Current Market Price" shall mean the average of the daily Closing
Prices per share of Common Stock for the ten (10) consecutive Trading Days
immediately prior to the date in question; provided, however, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Exercise Price pursuant to Section 9(a), (b), (c), (d) or (e) of this Warrant
occurs during such ten (10) consecutive Trading Days, the Closing Price for each
Trading Day prior to the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the same fraction by which the Exercise Price
is so required to be adjusted as a result of such other event, (2) if the "ex"
date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Exercise Price pursuant to
Section 9(a), (b), (c), (d) or (e) of this Warrant occurs on or after the "ex"
date for the issuance or distribution requiring such computation and prior to
the day in question, the Closing Price for each Trading Day on and after the
"ex" date for such other event shall be adjusted by multiplying such Closing
Price by the reciprocal of the fraction by which the Exercise Price is so
required to be adjusted as a result of such other event, and (3) if the "ex"
date for the issuance or distribution requiring such computation is prior to the
day in question, after taking into account any adjustment required pursuant to
clause (1) or (2) of this proviso, the Closing Price for each Trading Day on or
after such "ex" date shall be adjusted by adding thereto the amount of any cash
and the fair market value (as determined in good faith by the Company's Board of
Directors in a manner consistent with any determination of such value for
purposes of Section 9(d) of this Warrant, whose determination shall be
conclusive) of the evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock as of the close of
business on the day before such "ex" date. For purposes of this paragraph, the
term "ex" date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades regular way on the
relevant exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution and (2) when
used with respect to any subdivision or combination of shares of Common Stock,
means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective. Notwithstanding the foregoing, whenever
successive adjustments to the Exercise Price are called for pursuant to this
Section 9, such adjustments shall be made to the Current Market Price as may be
necessary or
14
appropriate to effectuate the intent of this Section 9 and to avoid unjust or
inequitable results as determined in good faith by the Company's Board of
Directors.
(3) "fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
(4) "Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Company's Board of Directors or by
statute, contract or otherwise).
(g) The Company may make such reductions in the Exercise Price, in addition
to those required by Section 9(a), (b), (c), (d) or (e) of this Warrant, as the
Company's Board of Directors considers to be advisable to avoid or diminish any
income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
(h) To the extent permitted by applicable law, the Company from time to
time may reduce the Exercise Price by any amount for any period of time if the
period is at least twenty (20) days, the reduction is irrevocable during such
period and the Company's Board of Directors shall have made a determination that
such reduction would be in the best interests of the Company, which
determination shall be conclusive and described in a Board Resolution. Whenever
the Exercise Price is reduced pursuant to the preceding sentence, the Company
shall mail or cause to be mailed to the holder of each Warrant at his last
address in the Warrant Register a notice of the reduction at least five (5) days
prior to the date the reduced Exercise Price is to take effect, and such notice
shall state the reduced Exercise Price and the period during which it will be in
effect.
(i) No adjustment in the Exercise Price shall be required under this
Section 9 unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Exercise Price; provided, however, that any
adjustments which by reason of this Section 9(i) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 9 shall be made by the Company and shall be
made to the nearest cent or to the nearest one hundredth of a share, as the case
may be. No adjustment need be made for a change in the par value of the Common
Stock.
(j) Notice to Holders of Warrants Prior to Certain Actions. In case:
(1) the Company shall declare a dividend (or any other distribution)
on its Common Stock that would require an adjustment in the Exercise Price
pursuant to this Section 9; or
(2) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any share of any
class or any other rights or warrants; or
15
(3) of any reclassification of the Common Stock of the Company (other
than a subdivision or combination of its outstanding Common Stock, or a change
from par value to no par value), or of any consolidation or merger to which the
Company is a party and for which approval of any shareholders of the Company is
required, or of the sale and transfer of all or substantially all of the assets
of the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company shall mail or cause to be mailed to the holder at such address
appearing in the Warrant Register as promptly as possible but in any event at
least fifteen (15) days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights are to be determined, or (y) the date on
which such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective or occur, and the date
as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of such dividend,
distribution, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. In addition, whenever the Exercise Price
is adjusted as provided in this Section 9, the Company shall prepare a notice of
such adjustment of the Exercise Price setting forth the adjusted Exercise Price
and the date on which each adjustment becomes effective and shall mail such
notice of such adjustment of the Exercise Price to the holder of each Warrant at
his last address in the Warrant Register within twenty (20) days of the
effective date of such adjustment. Failure to deliver such notice shall not
effect the legality or validity of any such adjustment.
(k) In any case in which this Section 9 provides that an adjustment shall
become effective immediately after a Record Date for an event, the Company may
defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such Record Date and before the occurrence of such event
the additional shares of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the Common Stock issuable
upon such conversion before giving effect to such adjustment and (ii) paying to
such holder any amount in cash in lieu of any fractions of shares of Common
Stock pursuant to Section 2(c) of this Warrant.
(l) For purposes of this Section 9, the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
(m) Upon each adjustment of the Exercise Price pursuant to this Section 9,
each Warrant shall thereupon evidence the right to purchase that number of
shares of Common Stock (calculated to the nearest hundredth of a share) obtained
by multiplying the number of shares of Common Stock purchasable immediately
prior to such adjustment upon exercise of the Warrant by the Exercise Price in
effect immediately prior to such adjustment and dividing the product so
16
obtained by the Exercise Price in effect immediately after such adjustment. The
adjustment pursuant to this Section 9(m) to the number of shares of Common Stock
purchasable upon exercise of a Warrant shall be made each time an adjustment of
the Exercise Price is made pursuant to this Section 9 (or would be made but for
Section 9(k) of this Warrant).
SECTION 10. EFFECT OF RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If
any of the following events occur, namely (i) any reclassification or change of
the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation, merger or
combination of the Company with another person as a result of which holders of
Common Stock shall be entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such Common Stock
(other than as a result of a change in name, a change in par value or a change
in the jurisdiction of incorporation), (iii) any statutory exchange, as a result
of which holders of Common Stock generally shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock (such transaction, a "Statutory Exchange"), or
(iv) any sale or conveyance of the properties and assets of the Company as, or
substantially as, an entirety to any other person as a result of which holders
of Common Stock shall be entitled to receive stock, securities or other property
or assets (including cash) with respect to or in exchange for such Common Stock,
then the Company or the successor or purchasing person, as the case may be,
shall issue a replacement Warrant providing that such Warrant shall be
exercisable for the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, Statutory Exchange, sale or
conveyance by a holder of a number of shares of Common Stock issuable upon
exercise of such Warrants (assuming, for such purposes, a sufficient number of
authorized shares of Common Stock available for issuance upon exercise of all
such Warrants) immediately prior to such reclassification, change,
consolidation, merger, combination, Statutory Exchange, sale or conveyance
assuming such holder of Common Stock did not exercise his rights of election, if
any, that holders of Common Stock who were entitled to vote or consent to such
transaction had as to the kind or amount of securities, cash or other property
receivable upon such reclassification, change, consolidation, merger,
combination, Statutory Exchange, sale or conveyance (provided that, if the kind
or amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, Statutory
Exchange, sale or conveyance is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purposes of this Section 10, the kind and
amount of securities, cash or other property receivable upon such
reclassification, change, consolidation, merger, combination, Statutory
Exchange, sale or conveyance for each non-electing share shall be deemed to be
the kind and amount so receivable per share by a plurality of the non-electing
shares). Such replacement Warrant shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
Section 9 of this Warrant. If, in the case of any such reclassification, change,
consolidation, merger, combination, Statutory Exchange, sale or conveyance, the
stock or other securities and assets receivable thereupon by a holder of shares
of Common Stock shall include shares of stock or other securities and assets of
a corporation other than the successor or purchasing person, as the case may be,
in such reclassification, change, consolidation, merger, combination, Statutory
Exchange, sale or conveyance, then such replacement Warrant shall also be
executed by such other person and shall contain such additional provisions to
protect the
17
interests of the holder of the Warrants as the Company's Board of Directors
shall reasonably consider necessary by reason of the foregoing. The Exercise
Price for the stock and other securities, property and assets (including cash)
so receivable upon such event shall be an amount equal to the Exercise Price
immediately prior to such event.
The Company shall mail or cause to be mailed such replacement Warrant to
each holder of Warrants, at such holder's address appearing in the Warrant
Register within twenty (20) days after execution thereof. Failure to deliver
such notice shall not affect the legality or validity of such replacement
Warrant.
The above provisions of this Section 10 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, combinations, sales and
conveyances.
If this Section 10 applies to any event or occurrence, Section 9 of this
Warrant shall not apply.
SECTION 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall promptly, on receipt
of an indemnification undertaking or other form of security reasonably
acceptable to the Company (or in the case of a mutilated Warrant, the Warrant),
cause the Warrant Agent to issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed. In every case, the
applicant for a replacement Warrant shall furnish to the Company such security
or indemnity as may be required by the Company to save it harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company evidence to its satisfaction of the destruction, loss or theft of
the applicant's Warrant and of the ownership thereof. Upon the issuance of any
replacement Warrant, the Company may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses connected therewith.
SECTION 12. NOTICE. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Warrant must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile; or (iii) one
(1) Business Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. If
notice is to be sent to the Company, the holder shall use its reasonable best
efforts to provide additional copies to the individuals listed below; provided,
however, that the failure of such holder to send such additional copies shall in
no way limit the effectiveness of any notice sent to the Company as provided for
below. The addresses and facsimile numbers for such communications shall be:
18
If to the Company:
ATS Medical, Inc.
3905 Annapolis Lane, Suite 105
Minneapolis, Minnesota 55447
Telephone: (763) 553-7736
Facsimile: (763) 557-2244
Attention: Mr. John R. Judd
with a copy to:
Dorsey & Whitney LLP
50 South Sixth Street, Suite 1500
Minneapolis, Minnesota 55402
Telephone: (612) 340-2600
Facsimile: (612) 340-2868
Attention: Timothy S. Hearn, Esq.
If to the Transfer Agent:
Wells Fargo Bank, National Association
Shareowner Services
161 North Concord Exchange Street
South St. Paul, MN 55075
Telephone: (800) 468-9716
If to the Warrant Agent:
Wells Fargo Bank, National Association
Sixth and Marquette, MAC N9303-120
Minneapolis, MN 55479
Telephone: (612) 316-1445
Facsimile: (612) 667-9825
Attention: Corporate Trust Services
If to a holder of this Warrant, to it at the address and facsimile number
set forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant. Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
19
SECTION 13. AMENDMENTS. This Warrant and any term hereof may be amended,
changed, waived, discharged, or terminated only by an instrument in writing
signed by the Company and the holder of such Warrant; provided, however that
Section 2(d) of the Warrant may be waived only by an instrument in writing
signed by the Company and all holders of Warrant Shares. Such amendment, change,
waiver, discharge or termination shall be binding on the Company and all of the
Warrant holder's assignees and transferees. No waivers of any term, condition or
provision of this Warrant in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such term, condition or
provision.
SECTION 14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. The
corporate laws of the State of Minnesota shall govern all issues concerning the
relative rights of the Company and its shareholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Warrant shall be governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of New York.
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Warrant and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. If any provision of this
Warrant shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Warrant in that jurisdiction or the validity or enforceability
of any provision of this Warrant in any other jurisdiction. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
SECTION 15. DESCRIPTIVE HEADINGS. The headings of this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
20
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of day and year first above written.
"COMPANY"
ATS MEDICAL, INC.
By:
------------------------------------
Its:
-----------------------------------
21
EXHIBIT A TO WARRANT
FORM OF EXERCISE NOTICE
The undersigned holder hereby exercises the right to purchase
______________ shares of Common Stock ("Warrant Shares") of ATS Medical, Inc., a
Minnesota corporation (the "Company"), evidenced by the attached Warrant (the
"Warrant"). Capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Warrant.
1. Form of Exercise Price. The holder intends that payment of the Exercise
Price shall be made as:
____ "Cash Exercise" with respect to ________ Warrant Shares; and/or
____ "Cashless Exercise" with respect to ______ Warrant Shares (to the
extent permitted by the terms of the Warrant).
2. Payment of Exercise Price. In the event that the holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the sum of $___________________ to the
Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The holder of this warrant has sold or will
sell the shares of common stock issuable pursuant to this Notice pursuant to a
registration statement or an exemption from registration under the Securities
Act of 1933, as amended.
4. Private Placement Representations. The holder of this Warrant confirms
the continuing validity of, and reaffirms as of the date hereof, its
representations and warranties set forth in Section 7 of the Warrant.
Date: ,
--------------- ----
- ------------------------------------- ----------------------------------------
Name of Registered Holder Tax ID of Registered Holder
(if applicable)
By:
---------------------------------
Its:
--------------------------------
A-1
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs
Wells Fargo Bank, National Association, as registrar and transfer agent for the
Company (the "Transfer Agent"), to issue the above indicated number of shares of
Common Stock in accordance with the Irrevocable Transfer Agent Instructions
dated __________________ from the Company and acknowledged and agreed to by the
Transfer Agent.
ATS MEDICAL, INC.
By:
------------------------------------
Its:
-----------------------------------
A-2
EXHIBIT B TO WARRANT
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of ATS Medical, Inc., a Minnesota
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: , 200
--------- -
By:
------------------------------------
Its:
-----------------------------------
Taxpayer I.D. No. or Soc. Sec. No:
________________________________________
Address:
________________________________________
________________________________________
________________________________________
Name in which new Warrant(s) should be registered: _____________________________
Right to Purchase No. of Shares of Common Stock: _______________________________
Name: __________________________________________________________________________
Taxpayer I.D. No. or Soc. Sec. No: _____________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
The balance of the attached Warrant not so transferred shall be returned to
the transferor in the form of a new Warrant reflecting such reduced amount.
B-1