EXHIBIT 4.2
FORM OF
WARRANT AGREEMENT
By and Between
DIVERSIFIED SENIOR SERVICES, INC.
and
STRASBOURGER PEARSON TULCIN WOLFF INCORPORATED
Dated as of November __, 1997
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of November __, 1997 by and between
DIVERSIFIED SENIOR SERVICES, INC., a North Carolina corporation (the "Company"),
and STRASBOURGER PEARSON TULCIN WOLFF INCORPORATED ("Strasbourger").
The Company proposes to issue to Strasbourger warrants as
hereinafter described (the "Strasbourger Warrants") to purchase up to an
aggregate of 150,000 shares, subject to adjustment as provided in Section 8
hereof (such shares, as adjusted, being hereinafter referred to as the "Shares")
of the Company's Common Stock, no par value per share (the "Common Shares"),
each Strasbourger Warrant entitling the holder thereof to purchase one Common
Share. All capitalized terms used herein and not otherwise defined herein shall
have the same meanings as in that certain underwriting agreement, of even date
herewith, by and between the Company and Strasbourger (the "Underwriting
Agreement"). In this Agreement, the singular includes the plural and the plural
includes the singular.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth and for other good and valuable
consideration, the parties hereto agree as follows;
1. Issuance of Warrants; Form of Warrant. The Company will
issue, sell and deliver the Strasbourger Warrants to Strasbourger or its bona
fide officers for an aggregate price of $__________. The form of the
Strasbourger Warrants and the form of election to purchase Shares to be attached
thereto shall be substantially as set forth on Exhibit A attached hereto. The
Strasbourger Warrants shall be executed on behalf of the Company by the manual
or facsimile signature of the present or any future Chief Executive Officer,
President or any Vice President of the Company, under its corporate seal,
affixed or in facsimile, and attested by the manual or facsimile signature of
the present or any future Secretary or Assistant Secretary of the Company.
2. Registration. The Strasbourger Warrants shall be numbered
and shall be registered in a Strasbourger Warrant register (the "Strasbourger
Warrant Register"). The Company shall be entitled to treat the registered holder
of any Strasbourger Warrant on the Strasbourger Warrant Register (the "Holder")
as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Strasbourger
Warrant on the part of any other person, and shall not be liable for any
registration of transfer of Strasbourger Warrants which are registered or are to
be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with such knowledge of
such facts that its participation therein amounts to bad faith. The Strasbourger
Warrants shall be registered initially in the name of "Strasbourger Pearson
Tulcin Wolff Incorporated" in such denominations as Strasbourger may request in
writing to the Company; provided, however, that Strasbourger may designate that
all or a portion of the Strasbourger Warrants be issued in varying amounts
directly to its bona fide officers, and not to Strasbourger. Such designation
will only be made by Strasbourger if it determines that such issuances would not
violate the interpretation of the Board of Governors of the National Association
of Securities Dealers, Inc. (the "NASD") relating to the review of corporate
financing arrangements.
3. Transfer of Warrants. The Strasbourger Warrants will not be
sold, transferred, assigned or hypothecated, in part or in whole (other than by
will or pursuant to the laws of descent and distribution), except to officers of
Strasbourger and thereafter only upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all cases
of transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Strasbourger Warrant or Strasbourger Warrants to the persons entitled thereto.
The Strasbourger Warrants may be exchanged at the option of the Holder thereof
for another Strasbourger Warrant, or other Strasbourger Warrants, of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Common Shares upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Strasbourger Warrants to be transferred on its books to any
person if such transfer would violate the Securities Act of 1933, as amended
(the "Act").
4. Term of Warrants; Exercise of Warrants. Each Strasbourger
Warrant entitles the registered owner thereof to purchase one Share at a
purchase price of $______ per Share (the "Exercise Price") at any time from the
first anniversary of the effective date of the Registration Statement until 5:00
p.m., New York City time, on ____________, 2002 (the "Warrant Expiration Date").
Prior to the Warrant Expiration Date, the Company will
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not take any action which would terminate the Strasbourger Warrants. The
Exercise Price and the Shares issuable upon exercise of the Strasbourger
Warrants are subject to adjustment upon the occurrence of certain events
pursuant to the provisions of Section 8 of this Agreement. Subject to the
provisions of this Agreement, each Holder shall have the right, which may be
exercised as set forth in such Strasbourger Warrants, to purchase from the
Company (and the Company shall issue and sell to such Holder) the number of
fully paid and nonassessable Common Shares specified in such Strasbourger
Warrants, upon surrender to the Company, or its duly authorized agent, of such
Strasbourger Warrants with the form of election to purchase attached thereto
duly completed and signed, with signatures guaranteed by a member firm of a
national securities exchange, a commercial bank or trust company located in the
United States or a member of the NASD and upon payment to the Company of the
Exercise Price, as adjusted in accordance with the provisions of Section 8 of
this Agreement, for the number of Shares in respect of which such Strasbourger
Warrants are then exercised.
Payment of such Exercise Price may be made at the Holder's election (i)
by certified or official bank check, (ii) in the event that the Holder holds
Common Shares of the Company and such Common Shares are listed on a domestic
stock exchange or quoted in the domestic over-the-counter market, by
transferring to the Company an amount of such Common Shares which, when
multiplied by the current market price of the Common Shares at the time of
exercise of such Strasbourger Warrant, equals the aggregate amount of the
consideration payable upon such exercise, (iii) by surrendering to the Company
the right to receive a portion of the number of Shares with respect to which
such Strasbourger Warrant is then being exercised equal to the product obtained
by multiplying such number of Shares by a fraction, the numerator of which is
the Exercise Price in effect on the date of such exercise and the denominator of
which is the current market price of the Common Shares in effect on such date,
or (iv) by a combination of the foregoing methods of payment selected by the
Holder. In any case where the consideration payable upon such exercise is being
paid in whole or in part pursuant to the provisions of clause (ii) or clause
(iii) of the preceding sentence, such exercise shall be accompanied by written
notice from the Holder specifying the manner of payment thereof, and in the case
of clause (ii), stating the amount of Common Shares of the Company to be applied
to such payment, and in the case of clause (iii), containing a calculation
showing the number of Shares with respect to which rights are being surrendered
thereunder and the net number of Shares to be issued after giving effect to such
surrender. No adjustment shall be made for any dividends on any Shares issuable
upon exercise of a Strasbourger Warrant. Upon each surrender of Strasbourger
Warrants and payment of the Exercise Price as aforesaid, the Company shall
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issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the Holder of such Strasbourger Warrants and in such name or
names as such Holder may designate, a certificate or certificates for the number
of full Shares so purchased upon the exercise of such Strasbourger Warrants,
together with cash, as provided in Section 9 of this Agreement, in respect of
any fractional Shares otherwise issuable upon such surrender. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
Shares as of the date of the surrender of Strasbourger Warrants and payment of
the Exercise Price as aforesaid; provided, however, that if, at the date of
surrender of such Strasbourger Warrants and payment of such Exercise Price, the
transfer books for the Common Shares or other class of securities issuable upon
the exercise of such Strasbourger Warrants shall be closed, the certificates for
the Shares shall be issuable as of the date on which such books shall next be
opened (whether before, on or after the Warrant Expiration Date) and until such
date the Company shall be under no duty to deliver any certificate for such
Shares; provided, further, however, that the transfer books of record, unless
otherwise required by law, shall not be closed at any one time for a period
longer than twenty (20) days. The rights of purchase represented by the
Strasbourger Warrants shall be exercisable, at the election of the Holders
thereof, either in full or from time to time in part and, in the event that any
Strasbourger Warrant is exercised in respect of less than all of the Shares
issuable upon such exercise at any time prior to the Warrant Expiration Date, a
new Strasbourger Warrant or Strasbourger Warrants will be issued for the
remaining number of Shares specified in the Strasbourger Warrant so surrendered.
5. Payment of Taxes. The Company will pay all documentary
stamp taxes, if any, attributable to the issuance of Shares upon the exercise of
Strasbourger Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue or delivery of any certificates for Shares in a name other than
that of the Holder of Strasbourger Warrants in respect of which such Shares are
issued.
6. Mutilated or Missing Warrants. In case any of the
Strasbourger Warrants shall be mutilated, lost, stolen or destroyed, the Company
may, in its discretion, issue and deliver in exchange and substitution for and
upon cancellation of the mutilated Strasbourger Warrant, or in lieu of and
substitution for the Strasbourger Warrant lost, stolen or destroyed, a new
Strasbourger Warrant of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence reasonably satisfactory to the
Company of such mutilation, loss, theft or destruction of such Strasbourger
Warrant and indemnity, unless
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mutilated, also reasonably satisfactory to the Company. An applicant for such
substitute Strasbourger Warrants shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Shares, etc. There have been reserved, and
the Company shall at all times keep reserved, out of the authorized and unissued
Common Shares, a number of Common Shares sufficient to provide for the exercise
of the rights of purchase represented by the outstanding Strasbourger Warrants.
American Stock Transfer & Trust Company, transfer agent for the Common Shares
(the "Transfer Agent"), and every subsequent transfer agent, if any, for the
Company's securities issuable upon the exercise of the Strasbourger Warrants
will be irrevocably authorized and directed at all times until the Warrant
Expiration Date to reserve such number of authorized and unissued Common Shares
as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Transfer Agent and with every subsequent transfer
agent of the Company's securities issuable upon the exercise of the Strasbourger
Warrants. The Company will supply the Transfer Agent or any subsequent transfer
agent with duly executed certificates for such purpose and will itself provide
or otherwise make available any cash which may be distributable as provided in
Section 9 of this Agreement. All Strasbourger Warrants surrendered in the
exercise of the rights thereby evidenced shall be canceled, and such canceled
Strasbourger Warrants shall constitute sufficient evidence of the number of
Shares that have been issued upon the exercise of such Strasbourger Warrants. No
Common Shares shall be subject to reservation in respect of unexercised
Strasbourger Warrants subsequent to the Warrant Expiration Date.
8. Adjustments of Exercise Price and Number of Shares. The
Exercise Price and the number and kind of securities issuable upon exercise of
each Strasbourger Warrant shall be subject to adjustment from time to time upon
the happening of certain events, as follows:
(a) In case the Company shall (i) declare a dividend
on its Common Shares in Common Shares or make a distribution
of Common Shares, (ii) subdivide its outstanding Common
Shares, (iii) combine its outstanding Common Shares into a
smaller number of Common Shares or (iv) issue by
reclassification of its Common Shares other securities of the
Company (including any such reclassification in connection
with a consolidation or merger in which the Company is the
continuing corporation), the number of Shares purchasable upon
exercise of each Strasbourger Warrant immediately prior
thereto shall be adjusted so that the
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Holder of each Strasbourger Warrant shall be entitled to
receive the kind and number of Shares or other securities of
the Company which he would have owned or have been entitled
to receive after the happening of any of the events described
above, had such Strasbourger Warrant been exercised
immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant
to this paragraph (a) shall become effective immediately
after the effective date of such event retroactive to
immediately after the record date, if any, for such event.
(b) In case the Company shall issue rights, options
or warrants to all holders of its Common Shares, without any
charge to such holders, entitling them (for a period expiring
within 45 days after the record date mentioned below in this
paragraph (b)) to subscribe for or to purchase Common Shares
at a price per share that is lower at the record date
mentioned below than the then current market price per Common
Share (as defined in paragraph (d) below), the number of
Shares thereafter purchasable upon exercise of each
Strasbourger Warrant shall be determined by multiplying the
number of Shares theretofore purchasable upon exercise of each
Strasbourger Warrant by a fraction, of which the numerator
shall be the number of Common Shares outstanding on such
record date plus the number of additional Common Shares
offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding
on such record date plus the number of shares which the
aggregate offering price of the total number of Common Shares
so offered would purchase at the then current market price per
Common Share. Such adjustment shall be made whenever such
rights, options or warrants are issued, and shall become
effective retroactively to immediately after the record date
for the determination of shareholders entitled to receive such
rights, options or warrants.
(c) In case the Company shall distribute to all
holders of its Common Shares stock other than Common Shares or
evidences of its indebtedness or assets (excluding cash
dividends payable out of consolidated earnings or retained
earnings and dividends or distributions referred to in
paragraph (a) above) or rights, options or warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase Common Shares (excluding those
referred to in paragraph (b) above), then in each case the
number of Shares thereafter issuable upon the
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exercise of each Strasbourger Warrant shall be determined by
multiplying the number of Shares theretofore issuable upon
the exercise of each Strasbourger Warrant, by a fraction, of
which the numerator shall be the current market price per
Common Share (as defined in paragraph (d) below) on the
record date mentioned below in this paragraph (c), and of
which the denominator shall be the current market price per
Common Share on such record date, less the then fair value
(as determined by the Board of Directors of the Company,
whose determination shall be conclusive) of the portion of
the shares of stock other than Common Shares or assets or
evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one
Common Share. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date
of distribution retroactive to immediately after the record
date for the determination of shareholders entitled to
receive such distribution.
(d) For the purpose of any computation under
paragraphs (b) and (c) of this Section 8, the current market
price per Common Share at any date shall be the average of the
daily closing prices for fifteen (15) consecutive trading days
commencing twenty (20) trading days before the date of such
computation. The closing price for each day shall be the last
reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the closing bid
and asked prices regular way for such day, in either case on
the principal national securities exchange on which the shares
are listed or admitted to trading, or if they are not listed
or admitted to trading on any national securities exchange,
but are traded in the over-the-counter market, the closing
sale price of the Common Shares or, in case no sale is
publicly reported, the average of the representative closing
bid and asked quotations for the Common Shares on the Nasdaq
SmallCap Market or any comparable system, or if the Common
Shares are not listed on the Nasdaq SmallCap Market or a
comparable system, the closing sale price of the Common Shares
or, in case no sale is publicly reported, the average of the
closing bid and asked prices as furnished by two members of
the NASD selected from time to time by the Company for that
purpose.
(e) No adjustment in the number of Shares purchasable
hereunder shall be required unless such adjustment would
require an increase or decrease of at
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least one percent (1%) in the number of Shares purchasable
upon the exercise of each Strasbourger Warrant; provided,
however, that any adjustments which by reason of this
paragraph (e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment,
but not later than three years after the happening of the
specified event or events. All calculations shall be made to
the nearest one thousandth of a share. Anything in this
Section 8 to the contrary notwithstanding, the Company shall
be entitled, but shall not be required, to make such changes
in the number of Shares purchasable upon the exercise of each
Strasbourger Warrant, in addition to those required by this
Section 8, as it in its discretion shall determine to be
advisable in order that any dividend or distribution in
shares of Common Shares, subdivision, reclassification or
combination of Common Shares, issuance of rights, warrants or
options to purchase Common Shares, or distribution of shares
of stock other than Common Shares, evidences of indebtedness
or assets (other than distributions of cash out of
consolidated earnings or retained earnings) or convertible or
exchangeable securities hereafter made by the Company to the
holders of its Common Shares shall not result in any tax to
the holders of its Common Shares or securities convertible
into Common Shares.
(f) Whenever the number of Shares purchasable upon
the exercise of each Strasbourger Warrant is adjusted, as
herein provided, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to
such adjustment by a fraction, of which the numerator shall be
the number of Shares purchasable upon the exercise of each
Strasbourger Warrant immediately prior to such adjustment, and
of which the denominator shall be the number of Shares so
purchasable immediately thereafter.
(g) For the purpose of this Section 8, the term
"Common Shares" shall mean (i) the class of stock designated
as the Common Shares of the Company at the date of this
Agreement or (ii) any other class of stock resulting from
successive changes or reclassifications of such shares
consisting solely of changes in par value, or from no par
value to par value, or from par value to no par value. In the
event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the Holders shall become
entitled to purchase any shares of capital stock of the
Company other than Common Shares, thereafter the number of
such
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other shares so purchasable upon exercise of each
Strasbourger Warrant and the Exercise Price of such shares
shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in paragraphs
(a) through (f), inclusive, and paragraphs (h) through (m),
inclusive, of this Section 8, and the provisions of Sections
4, 5, 7 and 10, with respect to the Shares, shall apply on
like terms to any such other shares.
(h) Upon the expiration of any rights, options,
warrants or conversion rights or exchange privileges, if any
thereof shall not have been exercised, the Exercise Price and
the number of Common Shares purchasable upon the exercise of
each Strasbourger Warrant shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been
had it originally been adjusted (or had the original
adjustment not been required, as the case may be) as if (i)
the only Common Shares so issued were the Common Shares, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion rights or exchange privileges
and (ii) such Common Shares, if any, were issued or sold for
the consideration actually received by the Company upon such
exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all
of such rights, options, warrants or conversion rights or
exchange privileges whether or not exercised; provided,
however, that no such readjustment shall have the effect of
increasing the Exercise Price by an amount in excess of the
amount of the adjustment initially made in respect to the
issuance, sale or grant of such rights, options, warrants or
conversion rights or exchange privileges.
(i) The Company may, at its option, at any time
during the term of the Strasbourger Warrants, reduce the then
current Exercise Price to any amount deemed appropriate by the
Board of Directors of the Company.
(j) Whenever the number of Shares issuable upon the
exercise of each Strasbourger Warrant or the Exercise Price of
such Shares is adjusted, as herein provided, the Company shall
promptly mail by first class mail postage prepaid, to each
Holder notice of such adjustment or adjustments. The Company
shall retain a firm of independent public accountants (who may
be the regular accountants employed by the Company) to make
any computation required by this Section 8 and
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shall cause such accountants to prepare a certificate setting
forth the number of Shares issuable upon the exercise of each
Strasbourger Warrant and the Exercise Price of such Shares
after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such
certificate shall be conclusive on the correctness of such
adjustment and each Holder shall have the right to inspect
such certificate during reasonable business hours.
(k) Except as provided in this Section 8, no
adjustment in respect of any dividends shall be made during
the term of the Strasbourger Warrants or upon the exercise of
the Strasbourger Warrants.
(l) In case of any consolidation of the Company with
or merger of, the Company with or into another corporation or
in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as
an entirety, the Company or such successor or purchasing
corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that each Holder
shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase
upon exercise of each Strasbourger Warrant the kind and amount
of shares and other securities and property (including cash)
which he would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or
conveyance had such Strasbourger Warrant been exercised
immediately prior to such action. The provisions of this
paragraph (l) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(m) Notwithstanding any adjustment in the Exercise
Price or the number or kind of shares purchasable upon the
exercise of the Strasbourger Warrants pursuant to this
Agreement, certificates for Strasbourger Warrants issued prior
or subsequent to such adjustment may continue to express the
same price and number and kind of Shares as are initially
issuable pursuant to this Agreement.
9. Fractional Interests. The Company shall not be required to
issue fractions of Shares on the exercise of Strasbourger Warrants. If more than
one Strasbourger Warrant shall be presented for exercise in full at the same
time by the same Holder, the number of Shares which shall be issuable upon the
exercise thereof shall be computed on the basis number of
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Shares issuable on exercise of the Strasbourger Warrants so presented.
If any fraction of a Share would, except for the provisions of this
Section 9, be issuable on the exercise of any Strasbourger Warrant (or
specified portions thereof), the Company shall purchase such fraction
for an amount in cash equal to the same fraction of the current market
price per Common Share (determined as provided in the second sentence
of Section 8(d) of this Agreement) on the date of exercise.
10. Registration Rights.
(a) Demand Registration Rights. The Company
covenants and agrees with Strasbourger and any other or subsequent Holders of
the Registrable Securities (as defined in paragraph (e) of this Section 10)
that, upon written request of the then Holder(s) of at least a majority of the
aggregate of the Registrable Securities which were originally issued on the date
hereof to Strasbourger or its designees, made at any time within the period
commencing one year and ending five years after the Effective Date, the Company
will file as promptly as practicable and, in any event, within 45 days after
receipt of such written request, at its sole expense, no more than once, a
post-effective amendment (the "Amendment") to the Registration Statement, or a
new Registration Statement or a Regulation A Offering Statement (an "Offering
Statement") under the Act, registering or qualifying the Registrable Securities
for sale. Within fifteen (15) days after receiving any such notice, the Company
shall give notice to the other Holders of the Registrable Securities advising
that the Company is proceeding with such Amendment, Registration Statement or
Offering Statement and offering to include therein the Registrable Securities of
such Holders. The Company shall not be obligated to any such other Holder unless
such other Holder shall accept such offer by notice in writing to the Company
within ten (10) days thereafter. No other securities of the Company shall be
entitled to be included in such Amendment, Registration Statement or Offering
Statement. The Company will use its best efforts, through its officers,
directors, auditors and counsel in all matters necessary or advisable, to file
and cause to become effective such Amendment, Registration Statement or Offering
Statement as promptly as practicable and for a period of two years thereafter to
reflect in the Amendment, Registration Statement or Offering Statement financial
statements which are prepared in accordance with Section 10(a)(3) of the Act and
any facts or events arising that, individually, or in the aggregate, represent a
fundamental and/or material change in the information set forth in the
Amendment, Registration Statement or Offering Statement to enable any Holders of
the Strasbourger Warrants to either sell such Strasbourger Warrants or to
exercise such Strasbourger Warrants and sell Shares, or to enable any holders of
Shares to sell such Shares, during said two-year period. The Holders may sell
the
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Registrable Securities pursuant to the Amendment, Registration Statement or the
Offering Statement without exercising the Strasbourger Warrants. If any
registration pursuant to this paragraph (a) is an underwritten offering, the
Holders of a majority of the Registrable Securities to be included in such
registration shall be entitled to select the underwriter or managing underwriter
(in the case of a syndicated offering) of such offering.
(b) Piggyback Registration Rights. The Company
covenants and agrees with Strasbourger and any other Holders or subsequent
Holders of the Registrable Securities that if, at any time within the period
commencing one year and ending five years after the Effective Date, it proposes
to file a Registration Statement or Offering Statement with respect to any class
of security (other than in connection with an offering to the Company's
employees) under the Act in a primary registration on behalf of the Company
and/or in a secondary registration on behalf of holders of such securities and
the registration form or Offering Statement to be used may be used for
registration of the Registrable Securities, the Company will give prompt written
notice (which, in the case of a Registration Statement or notification pursuant
to the exercise of demand registration rights other than those provided in
Section 10(a) of this Agreement, shall be within ten (10) business days after
the Company's receipt of notice of such exercise, in any event, shall be at
least 45 days prior to such filing) to, the Holders of Registrable Securities
(regardless of whether some of the Holders shall have theretofore availed
themselves of the right provided in Section 10(a) of this Agreement) at the
addresses appearing on the records of the Company of its intention to file a
Registration Statement or Offering Statement and will offer to include in such
registration statement or Offering Statement to the maximum extent possible, and
limited, in the case of a Regulation A offering, to the amount of the available
exemption, subject to sub-paragraphs (i) and (ii) of this paragraph (b), such
number of Registrable Securities with respect to which the Company has received
written requests for inclusion therein within ten (10) days after the giving of
notice by the Company. All registrations requested pursuant to this Section
10(b) are referred to herein as "Piggyback Registrations." All Piggyback
Registrations pursuant to this Section 10(b) will be made solely at the
Company's expense. This paragraph is not applicable to a Registration Statement
filed by the Company with the Commission on Forms S-4 or S-8 or any successor
forms.
(i) Priority on Primary Registrations. If a
Piggyback Registration includes an underwritten
primary registration on behalf of the Company and the
underwriter(s) for the offering being registered by
the Company shall determine in good
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faith and advise the Company in writing that in
its/their opinion the number of Registrable
Securities requested to be included in such
registration exceeds the number that can be sold in
such offering without materially adversely affecting
the distribution of such securities by the Company,
the Company will include in such registration (A)
first, the securities that the Company proposes to
sell and (B) second, the Registrable Securities
requested to be included in such registration,
apportioned pro rata among the Holders of
Registrable Securities and (C) third, securities of
the holders of other securities requesting
registration.
(ii) Priority on Secondary Registrations. If a
Piggyback Registration consists only of an
underwritten secondary registration on behalf of
holders of securities of the Company (other than
pursuant to Section 10(a)), and the underwriter(s)
for the offering being registered by the Company
advise the Company in writing that in its/their
opinion the number of Registrable Securities
requested to be included in such registration exceeds
the number which can be sold in such offering without
materially adversely affecting the distribution of
such securities by the Company, the Company will
include in such registration (A) first, the
securities requested to be included therein by the
holders requesting such registration and the
Registrable Securities requested to be included in
such registration above, pro rata, among all such
holders on the basis of the number of shares
requested to be included by each such holder and (B)
second, other securities requested to be included in
such registration.
Notwithstanding the foregoing, if any such
underwriter shall determine in good faith and advise the Company in writing that
the distribution of the Registrable Securities requested to be included in the
registration concurrently with the securities being registered by the Company
would materially adversely affect the distribution of such securities by the
Company, then the Holders of such Registrable Securities shall delay their
offering and sale for such period ending on the earliest of (1) 90 days
following the effective date of the Company's registration statement, (2) the
day upon which the underwriting syndicate, if any, for such offering shall have
been disbanded or, (3) such date as the Company, managing underwriter and
Holders of Registrable Securities shall otherwise agree. In
13
the event of such delay, the Company shall file such supplements, post-effective
amendments and take any such other steps as may be necessary to permit such
Holders to make their proposed offering and sale for a period of 120 days
immediately following the end of such period of delay. If any party disapproves
of the terms of any such underwriting, it may elect to withdraw therefrom by
written notice to the Company, the underwriter, and Strasbourger.
Notwithstanding the foregoing, the Company shall not be required to file a
registration statement to include Shares pursuant to this Section 10(b) if an
opinion of independent counsel, reasonably satisfactory to counsel for the
Company and counsel for Strasbourger, that the Shares proposed to be disposed of
may be transferred pursuant to the provisions of Rule 144 under the Act, shall
have been delivered to counsel for the Company.
(c) Other Registration Rights. In addition to the
rights above provided, the Company will cooperate with the then Holders of the
Registrable Securities in preparing and signing any Registration Statement or
Offering Statement, in addition to the Registration Statements and Offering
Statements discussed above, required in order to sell or transfer the
Registrable Securities and will supply all information required therefor, but
such additional Registration Statement or Offering Statement shall be at the
then Holders' cost, and expense; provided, however, that if the Company elects
to register or qualify additional Common Shares, the cost and expense of such
Registration Statement or Offering Statement will be pro rated between the
Company and the Holders of the Registrable Securities according to the aggregate
sales price of the securities being issued. Notwithstanding the foregoing, the
Company will not be required to file a Registration Statement or Offering
Statement at a time when the audited financial statements required to be
included therein are not available, which time shall be limited to the period
commencing 45 days after the end of a fiscal year and ending 90 days after the
end of such fiscal year.
(d) Action to be Taken by the Company. In connection
with the registration of Registrable Securities in accordance with paragraphs
(a), (b) or (c) of this Section 10, the Company agrees to:
(i) Bear the expenses of any registration or
qualification under paragraphs (a) or (b) of this
Section 10, including, but not limited to, legal,
accounting and printing fees; provided, however, that
in no event shall the Company be obligated to pay (A)
any fees and disbursements of special counsel for
Holders of Registrable Securities, or (B) any
underwriters' discount or commission in respect of
such Registrable Securities, or (C) upon the exercise
of and demand registration
14
right provided for in paragraph (a) of this Section
10, the cost of and liability or similar insurance
required by an underwriter, to the extent that such
costs are attributable solely to the offering of such
Registrable Securities, payment of which shall, in
each case, be the sole responsibility of the Holders
of the Registrable Securities;
(ii) Use its best efforts to register or qualify
the Registrable Securities for offer or sale under
state securities or Blue Sky laws of such
jurisdictions as Strasbourger shall reasonably
request and to do any and all other acts and things
which may be necessary or advisable to enable the
holders to consummate the proposed sale, transfer or
other disposition of such securities in any
jurisdiction; and
(iii) Enter into a cross-indemnity agreement, in
customary form, with each underwriter, if any, and
each holder of securities included in such Amendment,
Registration Statement or Offering Statement,
(e) For purposes of this Section 10, (i) the term
"Holder" shall include holders of Shares, and (ii) the term "Registrable
Securities" shall mean the Strasbourger Warrants and the Shares, issued upon
exercise of the Strasbourger Warrants.
11. Notices to Holders.
(a) Nothing contained in this Agreement or in any of
the Strasbourger Warrants shall be construed as conferring upon the Holders
thereof the right to vote or to receive dividends or to consent or to receive
notice as shareholders in respect of the meetings of shareholders or the
election of directors of the Company or any other matter, or any rights
whatsoever as shareholders of the Company; provided, however, that in the event
that a meeting of shareholders shall be called to consider and take action on a
proposal for the voluntary dissolution of the Company, other than in connection
with a consolidation, merger or sale of all, or substantially all, or its
property, assets, business and good will as an entirety, then and in that event
the Company shall cause a notice thereof to be sent by first-class mail, postage
prepaid, at least twenty (20) days prior to the date filed as a record date or
the date of closing the transfer books in relation to such meeting, to each
registered Holder of Strasbourger Warrants at such Holder's address appearing in
the Strasbourger Warrant Register; but failure to mail or to receive such notice
or any defect therein
15
or in the mailing thereof shall not affect the validity of any action taken in
connection with such voluntary dissolution. If such notice shall have been so
given and if such a voluntary dissolution shall be authorized at such meeting or
any adjournment thereof, then from and after the date on which such voluntary
dissolution shall have been duly authorized by the shareholders, the purchase
rights represented by the Strasbourger Warrants and all other rights with
respect thereto shall cease and terminate.
(b) In the event the Company intends to make any
distribution on its Common Shares (or other securities which may be issuable in
lieu thereof upon the exercise of Strasbourger Warrants), including, without
limitation, any such distribution to be made in connection with a consolidation
or merger in which the Company is the continuing corporation, or to issue
subscription rights or warrants to holders of its Common Shares, the Company
shall cause a notice of its intention to make such distribution to be sent by
first-class mail, postage prepaid, at least twenty (20) days prior to the date
fixed as a record date or the date of closing the transfer books in relation to
such distribution, to each registered Holder of Strasbourger Warrants at such
Holder's address appearing on the Strasbourger Warrant Register, but failure to
mail or to receive such notice or any defect therein or in the mailing thereof
shall not affect the validity of any action taken in connection with such
distribution.
12. Notices. Any notice pursuant to this Agreement to be given
or made by the Holder of any Strasbourger Warrant and/or the holder of any Share
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed as follows or to such other address as the
Company may designate by notice given in accordance with this Section 12, to the
Holders of Strasbourger Warrants and/or the holders of Shares:
Diversified Senior Services, Inc.
915 West Fourth Street
Winston-Salem, North Carolina 27101
Attn.: Susan L. Christiansen
with a copy to: House Law Firm 3325 Healy Dr.
Winston-Salem, North Carolina 27103
Attn.: Don R. House
Notices or demands authorized by this Agreement to be
given or made by the Company to or on the Holder of any Strasbourger Warrant
and/or the holder of any Share shall be sufficiently given or made (except as
otherwise provided in this
16
Agreement) if sent by first-class mail, postage prepaid, addressed to such
Holder or such holder of Shares at the address of such Holder or such holder of
Shares as shown on the Strasbourger Warrant Register or the books of the
Company, as the case may be.
13. Governing Law. THIS AGREEMENT AND EACH STRASBOURGER
WARRANT ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICT OF LAWS. The Company hereby agrees to accept service of process by
notice given to it pursuant to the provisions of Section 12.
14. Counterparts. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same agreement.
17
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day, month and year first above written.
(Corporate Seal) DIVERSIFIED SENIOR SERVICES, INC.
Attest: By:__________________________
Name:
Title:
- -----------------------------
Secretary
(Corporate Seal) STRASBOURGER PEARSON TULCIN
WOLFF INCORPORATED
Attest: By:__________________________
Name:
Title:
- --------------------------
18
EXHIBIT A
No. ________ ________ Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON _________, 2002
DIVERSIFIED SENIOR SERVICES, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received ______________ or
registered assigns, is the owner of the number of warrants set forth above, each
of which entitles the owner thereof to purchase at any time from ____________,
1998, until 5:00 p.m., New York City time on _________, 2002 (the "Warrant
Expiration Date"), one fully paid and nonassessable Common Share, without par
value (the "Common Shares"), of Diversified Senior Services, Inc., a North
Carolina corporation (the "Company"), at the purchase price of $______ per share
(the "Exercise Price") upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. The number of
Warrants evidenced by this Warrant Certificate (and the number of shares which
may be purchased upon exercise thereof) set forth above, and the Exercise Price
per share set forth above, are the number and Exercise Price as of the date of
original issuance of the Warrants, based on the Common Shares of the Company as
constituted at such date. As provided in the Warrant Agreement referred to
below, the Exercise Price and the number or kind of shares which may be
purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
This Warrant Certificate is subject to, and entitled to the
benefits of, all of the terms, provisions and conditions of an agreement dated
as of ___________, 1997 (the "Warrant Agreement") between the Company and
Strasbourger Pearson Tulcin Wolff Incorporated which Warrant Agreement is hereby
incorporated herein by reference and made a part hereof and to which Warrant
Agreement reference is hereby made for a full description of the rights,
limitations of rights, duties and immunities hereunder of the Company and the
holders of the Warrant Certificates. Copies of the Warrant Agreement are on file
at the principal office of the Company.
This Warrant Certificate, with or without other Warrant
Certificates, upon surrender at the principal office of the Company, may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and date evidencing Warrants entitling the holder to purchase a like aggregate
number of Common Shares as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered entitled such holder to purchase. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
No fractional Common Shares will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to
vote or receive dividends or be deemed the holder of Common Shares, any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained in the Warrant Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue of stock, reclassification of stock, change of par value
or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or, except as provided in the Warrant Agreement, to receive notice of
meetings, or to receive dividends or subscription rights or otherwise, until the
Warrant or Warrants evidenced by this Warrant Certificate shall have been
exercised and the shares shall have become deliverable as provided in the
Warrant Agreement.
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for the Company's Common Shares or other
class of stock purchasable upon the exercise of this Warrant are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares purchasable upon such exercise until the date of the reopening of said
transfer books.
IN WITNESS WHEREOF, Diversified Senior Services, Inc. has
caused the signature (or facsimile signature) of its President and its Secretary
to be printed hereon and its corporate seal (or facsimile) to be printed hereon.
Dated: __________________, 1997
DIVERSIFIED SENIOR SERVICES, INC.
By:___________________________
Name:
Title:
[Corporate Seal]
Attest:
- -----------------------------
Secretary
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate.)
TO: _______________________
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase the Common Shares issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of: Please insert social security or other
identifying number
- --------------------------------
- -------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security number or other
identifying number
- ------------------------------
- ------------------------------
- -------------------------------------------------------------------------------
(Please print name and address)
Dated: ______________, 19
------------------------------
Signature
(signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
FORM OF
ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED, ________________________ hereby sells,
assigns and transfers unto [_____________________________] this Warrant
Certificate, together with all right, title and interest herein, and does hereby
irrevocably constitute and appoint ________________, to transfer the within
Warrant Certificate on the books of the within-named Company, with full power of
substitution.
Dated: _______________, 19
Signature __________________
Signature Guaranteed:
NOTICE
The signature of the foregoing Assignment must correspond to
the name as written upon the face of this Warrant Certificate in every
particular, without alteration or enlargement or any change whatsoever.