Exhibit 4.5
WARRANT AGREEMENT
THIS WARRANT AGREEMENT is entered into this 31st day of August, 2004
(as amended, supplemented or modified from time to time, this "WARRANT
AGREEMENT"), by and between Crdentia Corp., a Delaware corporation (together
with its successors and permitted assigns, the "ISSUER"), and Bridge Opportunity
Finance LLC, a Delaware limited liability company (together with its successors
and permitted assigns, the "HOLDER").
RECITALS:
WHEREAS, pursuant to the terms of that certain Loan and Security
Agreement-Term Loan dated as of the date hereof (as the same may be amended,
supplemented or otherwise modified from time to time, the "TERM LOAN
AGREEMENT"), among the Holder and the Issuer, Baker Anderson Christie, Inc.
("BAKER"), Nurses Network, Inc. ("NURSES NETWORK"), New Age Staffing, Inc. ("NEW
AGE"), PSR Nurses, Ltd. ("PSR LTD."), PSR Nurse Recruiting, Inc. ("PSR
RECRUITING") and PSR Nurses Holdings Corp. ("PSR HOLDING"), CRDE Corp. ("CRDE"),
AHHC Acquisition Corporation ("AHHC"), and CPS Acquisition Corporation ("CPS"),
the Holder has agreed to make term loans to Borrower in an aggregate principal
amount of up to $10,000,000 (the "LOAN"), on the terms and conditions set forth
in the Term Loan Agreement and as further evidenced by the Notes (as defined
below);
WHEREAS, the Issuer will derive significant benefits as a result of the
Holder making the Loan; and
WHEREAS, in order to induce the Holder to make the Loan to Borrower,
the Issuer has agreed to issue to the Holder the Warrants hereinafter described.
NOW, THEREFORE, in consideration of the premises set forth herein, the
parties hereto agree as follows:
Section 1 DEFINITIONS.
1.1 DEFINED TERMS. As used in this Warrant Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"AFFILIATE" shall mean any Person controlling, controlled by or under
common control with another Person. For purposes of this definition, "CONTROL,"
"CONTROLLING" or "CONTROLLED BY" means the possession, directly or indirectly,
by a Person of the power to direct or cause direction of the management and
policies of any other Person, whether through ownership of equity interests, by
contract or otherwise. Without limiting the generality of the foregoing, each of
the following shall be an Affiliate: any officer, director, manager,
stockholder, member or subsidiary of a Person, and any other Person with whom or
which a Person has common stockholders, officers or directors, or equity holders
or managers. Notwithstanding anything to the contrary contained herein, the
Holder shall in no event be deemed an "AFFILIATE" of the Issuer or Borrower for
purposes of this Warrant Agreement.
"BORROWER" shall mean, collectively, the Issuer, Baker, Nurses Network,
New Age, PSR Ltd., PSR Recruiting, and PSR Holding.
"BUSINESS DAY" shall mean any day that is not (i) a Saturday, (ii) a
Sunday or (iii) if applicable, a day on which banks in Chicago, Illinois are
required or permitted to be closed.
"CHANGE OF CONTROL" shall mean the occurrence, at any time after the
date hereof, of (i) any Person or two or more Persons acting in concert
acquiring beneficial ownership (within the meaning of Rule 13d-3 of the
Commission under the Securities Exchange Act), directly or indirectly, of
securities of the Issuer (or other securities convertible into such securities)
representing more than fifty percent (50%) of the combined voting power of all
securities of the Issuer entitled to vote in the election of directors; or (ii)
commencing after the date hereof, individuals who as of the date hereof were
directors of the Issuer ceasing for any reason to constitute a majority of the
Board of Directors of the Issuer; or (iii) any Person or two or more Persons
acting in concert acquiring by contract or otherwise, or entering into a
contract or arrangement which upon consummation will result in its or their
acquisition of, or control over, securities of the Issuer (or other securities
convertible into such securities) representing more than fifty percent (50%) of
the combined voting power of all securities of the Issuer entitled to vote in
the election of directors; or (iv) the sale of all or substantially all of the
assets of the Issuer or its subsidiaries in one or a series of related
transactions.
"CHARTER" shall mean the Issuer's Certificate of Incorporation, as
amended from time to time.
"CLOSING DATE" shall mean the date of the closing of the transactions
contemplated by the Term Loan Agreement.
"CLOSING DATE CAPITALIZATION" shall mean the capitalization of the
Issuer on the Closing Date, as set forth on Schedule 3 attached hereto.
"COMMISSION" or "SEC" shall mean the Securities and Exchange Commission
or any successor regulatory body.
"COMMON STOCK" shall mean the shares of the Issuer's Common Stock,
$.0001 par value per share, and shall include any stock into which such Common
Stock shall have been converted or any stock resulting from any reclassification
of such Common Stock and all other stock of any class or classes (however
designated) of the Issuer, the registered holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
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"CONVERTIBLE SECURITIES" means securities convertible into or
exchangeable for Common Stock.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXEMPTED SECURITIES" shall mean (i) the Warrants and (ii) the Warrant
Shares.
"EXPIRATION DATE" shall mean the "EXPIRATION DATE" set forth in any
Warrant Certificate.
"EXERCISE PRICE" shall mean the exercise price of a Warrant as set
forth in the Warrant Certificate evidencing such Warrant; PROVIDED, HOWEVER,
that the Exercise Price is subject to adjustment pursuant to the provisions of
Section 12 hereof.
"FAIR MARKET VALUE" of a share of Common Stock on any date shall be
determined in a reasonably prompt manner and shall be calculated under clause
(i) or (ii) below, as applicable:
(i) (A) the closing price of the Common Stock as of the date
of issuance of any Warrants under this Warrant Agreement, as evidenced
by a Warrant Certificate, or, if no closing price is available on that
date, then the closing price on the immediately preceding Business Day
on which there is a closing price, if such security is listed or
admitted for trading on any domestic national securities exchange, as
officially reported on the principal securities exchange on which the
Common Stock is listed; or (B) if not reported as described in CLAUSE
(A), the closing sale price of the Common Stock as of the date in
question under this Warrant Agreement, or, if no closing sale price is
available on that date, then the closing sale price on the immediately
preceding Business Day on which there is a closing sale price, as
reported by NASDAQ, or any other system of automated dissemination of
quotations of securities prices then in common use, if so quoted; or
(ii) if the closing price of the Common Stock is neither
reported as described in CLAUSE (i)(A) above, nor quoted as described
in CLAUSE (i)(B) above, then the Fair Market Value shall be the higher
of (A) the Fair Market Value determined by the Issuer's Board of
Directors in good faith and on a reasonable basis; and (B) the Fair
Market Value determined in accordance with the appraisal procedure set
forth in CLAUSE (iii) below.
(iii) The Issuer and the Holder shall, acting reasonably and
in good faith, mutually select a single Qualified Appraiser. Such
Qualified Appraiser shall determine the value of the Warrant Shares,
assuming a sale thereof between a willing buyer and a willing seller,
both of whom have full knowledge of the financial and other affairs of
the Issuer, and neither of whom is under any compulsion to sell or to
buy. The decision of the Qualified Appraiser shall be final and binding
on all parties. The fees and expenses of the Qualified Appraiser shall
be borne by the Issuer. In the event that the Holder and the Issuer are
unable to mutually agree on a Qualified Appraiser within thirty (30)
days following either party's request for a determination of Fair
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Market Value or any event that requires such determination, then Fair
Market Value shall be determined pursuant to binding arbitration
commenced in Chicago, Illinois within thirty (30) days following the
expiration of the aforementioned 30-day period, pursuant to the
commercial arbitration rules of the American Arbitration Association,
before a single independent arbitrator mutually selected by the Issuer
and the Holder; provided, that upon the written notification of either
party, the arbitration shall be conducted before a panel of three
arbitrators, one each selected by the Holder and the Issuer,
respectively, and the third appointed jointly by the two arbitrators
selected by the parties. All fees, costs and expenses of such
arbitration shall be borne by the Issuer.
"FORM S-3" means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Issuer with the SEC.
"GAAP" shall mean United States generally accepted accounting
principles as promulgated by the Financial Accounting Standards Board, as in
effect from time to time.
"HOLDER" shall have the meaning set forth in the introductory paragraph
hereof.
"ISSUER" shall have the meaning set forth in the introductory paragraph
hereof.
"LOAN" shall have the meaning set forth in the recitals hereof.
"NASDAQ" means the Nasdaq Stock Market, Inc.
"NON-PUBLIC WARRANT SHARES" shall mean Warrant Shares that have not
been sold to the public and bear the legend set forth in SECTION 14.2. This term
shall include any securities into which Non-Public Warrant Shares are converted,
unless such securities are "margin securities" as that term is construed under
federal securities laws.
"NOTES" shall mean one or more promissory notes issued by Borrower to
Holder evidencing the Loan.
"OPTIONS" means any grant, issue or sale by the Issuer of any right,
warrant or option to subscribe for or to purchase Common Stock or any
Convertible Securities.
"PERSON" shall mean an individual or any sole proprietorship,
partnership, joint venture, limited liability company, trust, unincorporated
organization, association, corporation, entity, government or any agency or
political division thereof.
"PLAN" shall have the meaning set forth in SECTION 2.6.
"QUALIFIED APPRAISER" shall mean an independent, experienced appraiser
who is employed by a nationally or regionally recognized investment banking,
accounting or similar firm that is experienced in providing equity valuation
services in the Issuer's industry in the ordinary course of its business.
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"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" shall mean (i) the Common Stock issued to the
Holders pursuant to exercise of the Warrants and (ii) any Common Stock issued as
(or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of the shares referenced in (i) above,
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under Section 15 are not assigned pursuant to
the terms of this Warrant Agreement.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the number of
shares of Common Stock outstanding which are, and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
"SEC DOCUMENTS" shall mean the reports, schedules, forms, statements
and other documents required to be filed by the Issuer with the Commission
pursuant to the reporting requirements of the Exchange Act after December 31,
2002.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SUBSIDIARY" shall mean, with respect to a Person, any other Person of
which the outstanding capital stock, membership interest or other equity
interest possessing a majority of the voting power is owned or controlled by
such Person directly or indirectly through one or more Subsidiaries.
"TERM LOAN AGREEMENT" shall have the meaning set forth in the recitals
hereof.
"TRADING DAY" shall mean any day on which a Trading Market is open for
trading.
"TRADING MARKET" shall mean any of the NASD OTC Bulletin Board, NASDAQ
SmallCap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange.
"VALIDLY ISSUED" shall mean, with respect to any shares of capital
stock, that such stock has been validly issued and is fully paid and
nonassessable.
"WARRANT AGREEMENT" shall have the meaning set forth in the
introductory paragraph hereof.
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"WARRANT CERTIFICATE" shall mean a certificate evidencing one or more
Warrants, substantially in the form of EXHIBIT A attached hereto, with such
changes therein as may be required to reflect any adjustments made pursuant to
SECTION 12 hereof.
"WARRANT HOLDER" shall mean the Holder or any permitted transferee of
the Warrants and/or Warrant Shares represented by a Warrant Certificate, and for
purposes of SECTION 15 hereof shall at all times include holders of Non-Public
Warrant Shares.
"WARRANT OFFICE" shall mean the office or agency of the Issuer at which
the Warrant Register shall be maintained and where the Warrant Certificates may
be presented for exercise, exchange, substitution and transfer of the Warrant,
which office or agency will be the office of the Issuer at 14114 Dallas Parkway,
Suite 600, Dallas, TX 75254, and which office or agency may be changed by the
Issuer pursuant to prompt written notice to the Persons named in the Warrant
Register as the Warrant Holders.
"WARRANT REGISTER" shall mean the register, substantially in the form
of EXHIBIT B attached hereto, maintained by the Issuer at the Warrant Office.
"WARRANT SHARES" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants, as the number of such shares may be
adjusted from time to time pursuant to the Warrant Certificate or this Warrant
Agreement.
"WARRANTS" shall mean, collectively, the warrants issued pursuant to
this Warrant Agreement entitling the Warrant Holder(s) to purchase from the
Issuer shares of its Common Stock, which Warrants shall be evidenced by one or
more Warrant Certificates.
1.2 TERM LOAN DEFINITIONS. As used in this Warrant Agreement,
unless otherwise defined herein, terms defined in the Term Loan Agreement (as in
effect on the date hereof or as thereafter amended, restated or otherwise
modified, whether or not the Term Loan Agreement is thereafter terminated or
expires according to its terms) shall have such defined meanings when used
herein.
Section 2 REPRESENTATIONS AND WARRANTIES. The Issuer hereby
represents and warrants to the Holder as follows:
2.1 The Issuer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has the corporate
power and authority to execute and deliver this Warrant Agreement and the
Warrant Certificates, to issue the Warrants and to perform its obligations under
this Warrant Agreement and the Warrant Certificates.
2.2 The execution, delivery and performance by the Issuer of this
Warrant Agreement and the Warrant Certificates, the issuance of the Warrants and
the issuance of the Warrant Shares upon exercise of the Warrants have been duly
authorized by all necessary corporate action and do not and will not violate, or
result in a breach of, or constitute a default under, or require any consent
under, or result in the creation of any lien, charge or encumbrance upon any of
the assets of the Issuer pursuant to, (a) to the knowledge of the Issuer, any
law, statute, ordinance, rule, regulation, order or decree of any court,
governmental body, regulatory authority or administrative agency having
jurisdiction over the Issuer or its Subsidiaries or (b) the Issuer's Charter or
any material contract, mortgage, loan agreement, note, lease or other instrument
binding upon the Issuer or its Subsidiaries or by which any of their respective
assets or properties are bound.
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2.3 This Warrant Agreement and the Initial Warrant Certificate
have been duly executed and delivered by the Issuer. This Warrant Agreement and
the Initial Warrant Certificate constitute legal, valid, binding and enforceable
obligations of the Issuer. The Warrants, when issued upon execution and delivery
of the Warrant Certificates, will be duly authorized. The Warrant Shares, when
issued upon exercise of a Warrant Certificate in accordance with the terms
hereof and thereof (including payment of the aggregate Exercise Price of such
Warrant Certificate), will be duly authorized and Validly Issued.
2.4 This Warrant Agreement and the Initial Warrant Certificate
have been duly and validly authorized and are free from all taxes, liens,
claims, encumbrances and charges, in each case arising with respect to the
delivery thereof (other than those imposed through acts or omissions of the
Holder.
2.5 Based in part upon the representations of the Holder in
Section 14, the offer and issuance of the Warrants are exempt from the
registration requirements under the Securities Act.
2.6 The capitalization of the Issuer is as described in the SEC
Documents as of the respective dates set forth therein. The authorized capital
stock of the Issuer consists of (i) 50,000,000 shares of Common Stock, of which
approximately 6,343,091 shares were issued and outstanding as of the Closing
Date, and (ii) 10,000,000 shares of preferred stock, $.0001 par value. As of the
Closing Date, 2,750,000 shares of Preferred Stock were designated Series A
Preferred Stock, of which 2,750,000 were outstanding, 6,250,000 shares of
Preferred Stock were designated Series B Preferred Stock, of which 6,250,000
shares were outstanding, and 100,000 shares of Preferred Stock were designated
Series B-1 Preferred Stock, of which approximately 40,403 shares were
outstanding. All of such outstanding shares are duly authorized, Validly Issued.
No shares of capital stock of the Issuer, including the Common Stock, are
subject to preemptive rights or any other similar rights of the stockholders of
the Issuer or any liens or encumbrances imposed through the actions or failure
to act of the Issuer. Except as set forth on Schedule 2.6 attached hereto, and
other than pursuant to this Warrant Agreement, the Warrants and as contemplated
by the Issuer's employee benefit plans or director plans disclosed in the
Issuer's SEC Documents (the "Plans"), there are no outstanding options,
warrants, scrip, convertible securities, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever that could require the Issuer to issue
additional shares of capital stock of the Issuer. Except as set forth on
SCHEDULE 2.6 attached hereto, there are no agreements or arrangements under
which the Issuer is obligated to register the sale of any of its securities
under the Securities Act.
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2.7 Neither the Issuer nor, to the knowledge of the Issuer, any
Person acting for the Issuer has directly or indirectly made any offers or sales
of any security or solicited any offers to buy any security under circumstances
within the prior six months that would require registration under the Securities
Act of the delivery of this Warrant Agreement or any Warrant Certificate (and
the shares of Common Stock issuable upon exercise of any Warrant Certificate);
2.8 Neither the Issuer nor, to the knowledge of the Issuer, any
Person acting for the Issuer has conducted any "general solicitation" (as such
term is defined in Regulation D of the Securities Act) with respect to this
Warrant Agreement and the Common Stock issuable upon exercise of any Warrant
Certificate.
2.9 The Issuer has furnished the Holder and its advisors with all
materials (a) relating to the business, finances and operations of the Issuer
and its Subsidiaries and (b) relating to the offer and sale of the Warrants and
the Warrant Shares that have been requested in writing by the Holder or its
advisors.
Section 3 ISSUANCE OF WARRANTS. The Issuer hereby agrees to issue
and deliver to the Holder or, at the option of the Holder, an Affiliate thereof
designated by the Holder in writing, (a) on the Closing Date, one or more
Warrant Certificates which shall entitle the Holder to purchase, in the
aggregate, three percent (3%) of the Issuer's Closing Date Capitalization at an
Exercise Price of the lesser of (i) $3.15 per share or (ii) the Fair Market
Value per share (the "Initial Warrant Certificate") and (b) one or more Warrant
Certificates evidencing the Warrants to be issued in accordance with the
provisions of Section 3 of the Term Loan Agreement.
Section 4 REGISTRATION, TRANSFER AND EXCHANGE OF CERTIFICATES.
4.1 The Issuer shall maintain at the Warrant Office the Warrant
Register for registration of the Warrants and the Warrant Certificates and
transfers thereof. On the Closing Date, the Issuer shall register the Warrants
and the Warrant Certificates in the Warrant Register in the name of the Holder
or an Affiliate thereof, as the case may be. The Issuer may deem and treat the
registered Warrant Holders as the absolute owners of the Warrant Certificates
and the Warrants represented thereby (notwithstanding any notation of ownership
or other writing on the Warrant Certificates made by any Person) for the purpose
of any exercise thereof or any distribution to the holders thereof, and for all
other purposes, and the Issuer shall not be affected by any notice to the
contrary.
4.2 Subject to SECTION 14, the Issuer shall register the transfer
of any outstanding Warrants in the Warrant Register upon surrender of the
Warrant Certificates evidencing such Warrants to the Issuer at the Warrant
Office, accompanied (if reasonably required by the Issuer) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Issuer, duly executed by the Warrant Holder(s) or by the duly appointed legal
representative thereof. Upon any such registration of transfer, new Warrant
Certificates evidencing such transferred Warrants shall be issued to the
transferee and the surrendered Warrant Certificates shall be canceled. If fewer
than all the Warrants evidenced by Warrant Certificates surrendered for transfer
are to be transferred, new Warrant Certificate(s) evidencing such remaining
number of Warrants shall be issued to the holder surrendering such Warrant
Certificates.
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4.3 Warrant Certificates may be exchanged at the option of the
Warrant Holders, when surrendered to the Issuer at the Warrant Office, for
another Warrant Certificate(s) of like tenor and representing in the aggregate a
like number of Warrants. Warrant Certificates surrendered for exchange shall be
canceled.
4.4 No charge shall be made for any such transfer or exchange
except for any tax or other governmental charge imposed on the Warrant Holder in
connection therewith. Except as provided in SECTION 14, each Warrant Certificate
issued upon transfer or exchange shall bear the legend set forth in SECTION 14.2
if the Warrant Certificate presented for transfer or exchange bore such legend.
Section 5 MUTILATED OR MISSING WARRANT CERTIFICATES. If any
Warrant Certificate is mutilated, lost, stolen or destroyed, the Issuer shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of evidence
reasonably satisfactory to the Issuer of such mutilation, loss, theft or
destruction of such Warrant Certificate and, if requested, indemnity reasonably
satisfactory to the Issuer. The Issuer acknowledges that a written indemnity by
the Holder or, if an Affiliate of the Holder is the holder of such mutilated,
lost, stolen or destroyed Warrant Certificate, by such Affiliate, shall be
satisfactory to the Issuer for such purpose. No service charge shall be made for
any such exchange or substitution, but all expenses and reasonable charges
associated with procuring such indemnity and all stamp, tax and other
governmental duties that may be imposed in relation thereto shall be borne by
the holder of such Warrant Certificate.
Section 6 DURATION AND EXERCISE OF WARRANTS.
6.1 The Warrants shall be exercisable in whole or in part by the
registered Warrant Holder on any Business Day after the Closing Date and on or
before 5:00 P.M., Chicago, Illinois time, on the Expiration Date.
6.2 Subject to the provisions of this Warrant Agreement, the
Warrants may be exercised by the Warrant Holder by the surrender to the Issuer
at the Warrant Office of the Warrant Certificate evidencing the Warrants to be
exercised, with the Form of Election to Purchase (Annex 1 to applicable Warrant
Certificate) attached thereto duly completed and signed, and upon payment of the
aggregate Exercise Price for the number of Warrant Shares in respect of which
such Warrants are being exercised. The Exercise Price shall be paid, at the
option of the Warrant Holder, (a) in lawful money of the United States of
America, (b) by surrender of one or more Notes or a portion thereof having an
outstanding principal balance equal to the Exercise Price (with concurrent
issuance of a replacement note reflecting the remaining principal balance and
accrued but unpaid interest thereon), and/or (c) by surrender to the Issuer of
shares of Common Stock then owned by the Warrant Holder and valued for purposes
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hereof at Fair Market Value at the time of exercise. In lieu of exercising
Warrants pursuant to the immediately preceding sentence, the Warrant Holder
shall have the right to require the Issuer to convert the Warrants, in whole or
in part and at any time or times (the "CONVERSION RIGHT"), into Warrant Shares,
as follows: upon exercise of the Conversion Right, the Issuer shall deliver to
the Warrant Holder (without payment by the Warrant Holder of any Exercise Price)
that number of Warrant Shares equal to the quotient obtained by dividing:
(a) THE DIFFERENCE OF:
(i) the aggregate Fair Market Value immediately prior
to the exercise of the Conversion Right for all Warrant Shares
issuable upon exercise of the portion of the Warrants being
converted, LESS
(ii) the aggregate Exercise Price for all such
Warrant Shares immediately prior to the exercise of the
Conversion Right,
BY
(b) the Fair Market Value of one (1) share of Common Stock
immediately prior to the exercise of the Conversion Right.
6.3 Upon exercise of any Warrants hereunder the Issuer shall issue
and cause to be delivered to or upon the written order of the Warrant Holders of
such Warrants and in such name or names as such Warrant Holders may designate, a
certificate for the Warrant Share or Warrant Shares issued upon the exercise of
such Warrants. Any Persons so designated to be named therein shall be deemed to
have become holders of record of such Warrant Share or Warrant Shares as of the
date of exercise of such Warrants. If fewer than all of the Warrants evidenced
by a Warrant Certificate are exercised at any time, a new Warrant Certificate(s)
shall be issued for the remaining number of Warrants in accordance with the
provisions of SECTION 3.2 hereof.
6.4 Notwithstanding any other provision of this Warrant Agreement,
unless previously exercised in full, each Warrant shall terminate upon the
earlier to occur of (a) of a Change of Control and (b) the Expiration Date. The
Issuer hereby agrees to provide notice to the Holder at least twenty (20) days
prior to any Change of Control.
Section 7 FRACTIONAL SHARES. Fractional shares shall not be
issued upon the exercise of the Warrants, but in any case where the Holder
would, except for the provisions of this Section, be entitled under the terms
hereof to receive a fractional share, the Issuer shall, upon the exercise of
this Warrant for the largest number of whole shares then called for, pay a sum
in cash equal to the Fair Market Value of such fractional share over the
proportional part of the Warrant Exercise Price represented by such fractional
share.
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Section 8 PAYMENT OF TAXES. The Issuer will pay all taxes
attributable to the initial issuance of the Warrants and the initial issuance of
Warrant Shares upon the exercise of any Warrants (other than income tax
liability of the Warrant Holders) and any transfer taxes.
Section 9 STOCKHOLDER RIGHTS. Nothing contained in this Warrant
Agreement or in any of the Warrant Certificates shall be construed as conferring
upon the Warrant Holders the right to vote, consent or receive notice as a
stockholder in respect of the meetings of stockholders or the election of
directors of the Issuer or any other matter, or any rights whatsoever as a
stockholder of the Issuer prior to exercise of Warrants for Warrant Shares,
except as specifically set forth in this Warrant Agreement or the Term Loan
Agreement. Nothing contained in this Warrant Agreement or in any Warrant
Certificate shall be construed as imposing any (a) obligation on the Warrant
Holders to purchase any securities of the Issuer or any of its Affiliates, or
(b) liabilities on the Warrant Holders as stockholders of the Issuer, whether
such obligation or liabilities are asserted by the Issuer or by creditors of the
Issuer.
Section 10 RESERVATION AND ISSUANCE OF WARRANT SHARES;
CHARTER PROVISIONS. The Issuer will at all times have authorized, and reserve
and keep available and free from liens, encumbrances and preemptive rights, for
the purpose of enabling the Issuer to satisfy any obligation to issue Warrant
Shares upon the exercise of the Warrants, such number of shares of Common Stock
deliverable upon exercise of all outstanding Warrants and will take all actions
necessary to ensure that the Exercise Price at all times remains equal to or
greater than the par value per share of any Common Stock, including, without
limitation, causing the Issuer's Charter to be amended to reduce or eliminate
the par value of any Common Stock.
Section 11 OBTAINING GOVERNMENTAL APPROVALS. Subject, in the
case of any registration under the Securities Act, to the limitations set forth
in SECTION 15, the Issuer will, at its own expense, from time to time take all
action that may be necessary to obtain and keep effective any and all permits,
consents and approvals of governmental agencies and authorities that are or
become required in connection with (a) the issuance, sale, transfer and delivery
of the Warrants and the Warrant Certificates, (b) the exercise of the Warrants,
and (c) the issuance, sale, transfer and delivery of the Warrant Shares.
Section 12 ADJUSTMENTS.
12.1 Prior to the Expiration Date, the Exercise Price payable upon
the exercise of the Warrants is subject to adjustment from time to time as
follows:
(a) If the Issuer shall issue any Additional Stock (as defined
below) without consideration or for a consideration per share less than
the Exercise Price for any Warrant in effect immediately prior to the
issuance of such Additional Stock, the Exercise Price for such
Warrant(s) in effect immediately prior to each such issuance shall
forthwith (except as otherwise provided in this SECTION 12.1) be
adjusted to a price determined by multiplying such Exercise Price by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding and deemed issued pursuant to SECTION 12.1(e)
immediately prior to such issuance plus the number of shares of Common
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Stock that the aggregate consideration received by the Issuer for such
issuance would purchase at such Exercise Price; and the denominator of
which shall be the number of shares of Common Stock outstanding and
deemed issued pursuant to SECTION 12.1(e) immediately prior to such
issuance plus the number of shares of such Additional Stock.
(b) No adjustment of the Exercise Price for any Warrant(s)
shall be made in an amount less than one cent per share, provided that
any adjustments that are not required to be made by reason of this
sentence shall be carried forward and shall be either taken into
account in any subsequent adjustment made prior to three (3) years from
the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of three (3) years from the date
of the event giving rise to the adjustment being carried forward.
(c) In the case of the issuance of Additional Stock for cash,
the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by the Issuer for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(d) In the case of the issuance of the Additional Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as
determined by the Board of Directors irrespective of any accounting
treatment.
(e) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable
securities, the following provisions shall apply for all purposes of
this Section 12.1:
(i) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including, without
limitation, the passage of time) of such options to purchase
or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in SECTIONS 12.1(c) and
12.1(d)), if any, received by the Issuer upon the issuance of
such options or rights plus the minimum exercise price
provided in such options or rights for the Common Stock
covered thereby.
(ii) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange (assuming
the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of
time) for any such convertible or exchangeable securities or
upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and
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subsequent conversion or exchange thereof shall be deemed to
have been issued at the time such securities were issued or
such options or rights were issued and for a consideration
equal to the consideration, if any, received by the Issuer for
any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any,
to be received by the Issuer upon the conversion or exchange
of such securities or the exercise of any related options or
rights (the consideration in each case to be determined in the
manner provided in Sections 12.1(c) and 12.1(d)).
(iii) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration
payable to the Issuer upon exercise of such options or rights
or upon conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the
Exercise Price of any Warrant(s), to the extent in any way
affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or
exchange of such securities.
(iv) Upon the expiration of any such options or
rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to
such convertible or exchangeable securities, the Exercise
Price of any Warrant(s), to the extent in any way affected by
or computed using such options, rights or securities or
options or rights related to such securities, shall be
recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable
securities that remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the
options or rights related to such securities.
(v) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
SECTIONS 12.1(e)(i) and 12.1(e)(ii) shall be appropriately
adjusted to reflect any change, termination or expiration of
the type described in either SECTION 12.1(e)(iii) or
12.1(e)(iv).
(f) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to SECTION 12.1(e)) by
the Issuer after the applicable Purchase Date other than:
(i) shares of Common Stock issued pursuant to a
transaction described in SECTION 12.1(g) hereof;
(ii) shares of Common Stock issued or deemed issued
to employees, consultants, officers or directors (if in
transactions with primarily non-financing purposes) of the
Issuer in effect on the date hereof pursuant to a stock option
plan or restricted stock purchase plan approved by the
stockholders and Board of Directors of the Issuer ("Plan
Grants").
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(iii) a number of shares of Common Stock equal to
fifteen percent (15%) of the Issuer's Closing Date
Capitalization issued or deemed issued to employees,
consultants, officers or directors (if in transactions with
primarily non-financing purposes) of the Issuer other than
pursuant to Plan Grants;
(iv) shares of Common Stock issued or deemed issued
to the Issuer's current Chief Executive Officer, President
and/or Chief Financial Officer (as of the date hereof), or
pursuant to options or other Common Stock purchase rights
approved by the Board of Directors of the Issuer not in excess
of Plan Grants referred to in (ii) above;
(v) shares of Common Stock issued or deemed issued
following the third anniversary of the Closing Date to
employees, consultants, officers or directors of the Issuer
directly or pursuant to a stock option plan and/or agreement
approved by the Issuer's Board of Directors;
(vi) shares of Common Stock issued, issuable or
deemed issued upon the sale or conversion of the Issuer's
Series A Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock or Series C Preferred Stock;
(vii) shares of Common Stock issued or issuable as a
dividend or distribution on the Issuer's Series A Preferred
Stock, Series B Preferred Stock, Series B-1 Preferred Stock,
or Series C Preferred Stock;
(viii) shares of Common Stock issued or issuable (1)
in a bona fide, firmly underwritten public offering under the
Securities Act or (2) upon exercise of warrants or rights
granted to underwriters in connection with such a public
offering;
(ix) shares of Common Stock issued or issuable
pursuant to any rights or agreements, options, warrants or
convertible securities outstanding as of the Closing Date; or
(x) shares of Common Stock issued or issuable (1) in
connection with a bona fide business acquisition of or by the
Issuer, whether by merger, consolidation, sale of assets, sale
or exchange of stock or otherwise or (2) to persons or
entities with which the Issuer has business relationships
provided such issuances are for other than primarily equity
financing purposes, which shall in no event exceed more than
twenty percent (20%) of the Common Stock, on a fully diluted
basis, on the date hereof.
(g) In the event the Issuer should at any time or from time to
time prior to the Expiration Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
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Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if no
record date is fixed), the Exercise Prices of each Warrant shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased
in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such Common
Stock Equivalents.
(h) If the number of shares of Common Stock outstanding at any
time prior to the Expiration Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of
such combination, the Exercise Prices for the Warrants shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased
in proportion to such decrease in outstanding shares.
(i) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for
elsewhere in this SECTION 12.1) provision shall be made so that the
holders of the Warrants shall thereafter be entitled to receive upon
exercise of such Warrants the number of shares of stock or other
securities of the Issuer or otherwise, to which a holder of the number
of shares of Common Stock deliverable upon exercise of the Warrants
would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the
provisions of this SECTION 12.1 with respect to the rights of the
Holders after the recapitalization to the end that the provisions of
this SECTION 12.1 (including adjustment of the Exercise Price then in
effect and the number of shares purchasable upon exercise of each such
Warrant) shall be applicable after that event as nearly equivalent as
may be practicable.
12.2 Notwithstanding any adjustments in the Exercise Price or kind
of securities or other assets purchasable upon the exercise of any Warrant,
Warrant Certificates heretofore or hereafter issued may continue to express the
same Exercise Price and kind of shares as are stated on the Warrant Certificates
initially issued pursuant to this Warrant Agreement.
12.3 Any adjustment pursuant to this Section 12, whether to the
kind of Warrant Shares or to the Exercise Price, shall be made successively
whenever an event referred to herein occurs. As a condition precedent to the
taking of any action that would require an adjustment pursuant to this Section
12, the Issuer shall take any and all actions necessary in order that it may
thereafter issue Validly Issued Warrant Shares to the Warrant Holders for all
Warrant Shares that they are entitled to receive after adjustment.
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12.4 No adjustments to the Exercise Price or the number of Warrant
Shares under this Section 12 shall be made in connection with the issuance of
Exempted Securities.
Section 13 NOTICES TO WARRANT HOLDERS.
13.1 CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Exercise Price of any Warrant pursuant to
SECTION 12.1, the Issuer, at its expense, shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each Holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Issuer shall, upon the written request at any time of any Holder, furnish or
cause to be furnished to such Holder a like certificate setting forth (i) such
adjustment and readjustment, (ii) the Exercise Price for such Warrant at the
time in effect, and (iii) the number of shares of Common Stock that at the time
would be received upon the exercise of the Warrant.
13.2 NOTICES OF RECORD DATE. In the event of the taking by the
Issuer of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive a dividend (other
than a cash dividend) or other distribution, any right to sub scribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities, or to receive any other right, the Issuer shall mail to each Holder,
at least twenty (20) days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right.
Section 14 RESTRICTIONS ON TRANSFER.
14.1 Each of the Holder and any other Warrant Holders who are
issued Warrants on the Closing Date pursuant to this Warrant Agreement:
(a) represents that it is an "ACCREDITED INVESTOR" within the
meaning of the Securities Act and is acquiring the Warrants for its own
account for investment and not with a view to any distribution or
public offering within the meaning of the Securities Act, except in any
case pursuant to the registration of such Warrants or Warrant Shares
under the Securities Act or pursuant to a valid exemption from such
registration requirement;
(b) acknowledges that the Warrants and the Warrant Shares
issuable upon exercise thereof have not been registered under the
Securities Act;
(c) agrees that it will not sell or otherwise transfer any of
its Warrants or Warrant Shares except upon the terms and conditions
specified herein and that it will cause any transferee thereof to agree
to take and hold the same subject to the terms and conditions specified
herein; PROVIDED, HOWEVER, that the Warrant Holders may sell the
Warrants or the Warrant Shares purchased upon exercise of the Warrants
in one or more private transactions not requiring registration under
the Securities Act; and
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(d) acknowledges that it has carefully reviewed the SEC
Documents, including the risk factors contained in the Issuer's Annual
Reports on Form 10-KSB and Quarterly Reports on Form 10-QSB.
14.2 Except as provided in SECTION 14.4 hereof, each Warrant
Certificate and each certificate for the Warrant Shares issued to the Holder or
any other Warrant Holder or to a subsequent transferee thereof shall include a
legend in substantially the following form (with such changes therein as may be
appropriate to reflect whether such legend refers to Warrants or Warrant
Shares); PROVIDED THAT such legend shall not be required if such transfer is
being made pursuant to an effective registration statement filed with the
Commission in accordance with the Securities Act, in connection with a sale that
is exempt from registration pursuant to Rule 144 under the Securities Act or if
the opinion of counsel referred to in SECTION 14.3 is to the further effect that
neither such legend nor the restrictions on transfer in this SECTION 14 are
required in order to ensure compliance with the Securities Act:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES FOR WHICH
THE WARRANTS ARE EXERCISABLE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. SUCH
WARRANTS AND SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN AND ARE SUBJECT TO OTHER PROVISIONS OF THE
WARRANT AGREEMENT DATED AS OF AUGUST 31, 2004, BETWEEN THE ISSUER AND
BRIDGE OPPORTUNITY FINANCE, LLC, A COMPLETE AND CORRECT COPY OF WHICH
IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND
WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE.
14.3 Prior to any assignment, transfer or sale of any Warrant or
any Warrant Shares, the Warrant Holder shall give written notice to the Issuer
of such Warrant Holder's intention to effect such assignment, transfer or sale,
which notice shall set forth the date of such proposed assignment, transfer or
sale and the identity of the proposed transferee. Each Warrant Holder wishing to
effect such a transfer of any Warrant or Warrant Shares shall also furnish to
the Issuer an agreement by the transferee thereof that it is taking and holding
the same subject to the terms and conditions specified herein and, at the
request of the Issuer, a written opinion of such Warrant Holder's counsel, in
form reasonably satisfactory to the Issuer, to the effect that the proposed
transfer may be effected without registration under the Securities Act.
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14.4 The restrictions set forth in this SECTION 14 shall terminate
and cease to be effective with respect to any Warrants or Warrant Shares
registered under the Securities Act or upon receipt by the Issuer of an opinion
of counsel to the Warrant Holders, in form reasonably satisfactory to the
Issuer, to the effect that compliance with such restrictions is not necessary in
order to comply with the Securities Act with respect to the transfer of the
Warrants and the Warrant Shares. Whenever such restrictions shall so terminate
the Warrant Holder holding such Warrants and/or Warrant Shares shall be entitled
to receive from the Issuer, without expense (other than transfer taxes), Warrant
Certificates or certificates for such Warrant Shares not bearing the legend set
forth in SECTION 14.2 at which time the Issuer will rescind any transfer
restrictions relating thereto.
Section 15 REGISTRATION RIGHTS. The Issuer covenants and agrees as
follows:
15.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If, at any time after January 1,
2005, the Issuer shall receive from the holders of at least a majority
of the Registrable Securities then outstanding (the "INITIATING
HOLDERS") a written request that the Issuer file a registration
statement in accordance with the Securities Act covering the
registration of all or part of the Registrable Securities then held by
such holders, the Issuer shall:
(i) within ten (10) days of the receipt thereof, give
written notice of the proposed registration, qualification or
compliance to all other holders of Registrable Securities; and
(ii) use its reasonable and diligent efforts to
effect as soon as practicable, the registration under the
Securities Act of all such holders' Registrable Securities as
are specified in such request, together with such portion of
the Registrable Securities of any other holder or holders of
Registrable Securities joining in such request as are
specified in a written notice given within fifteen (15) days
after receipt of written notice from the Issuer; PROVIDED,
HOWEVER, that the Issuer shall not be obligated to take any
action to effect any such registration pursuant to this
SECTION 15.1, (A) after the Issuer has effected one (1)
registration under this SECTION 15.1 or (B) if less than a
majority of the then outstanding Registrable Securities will
be registered.
(b) REGISTRATION STATEMENTS. Any registration statement filed
pursuant to this SECTION 15.1 shall be on Form S-3, or if Form S-3 is
not available, Form S-1 or other appropriate form permitting
registration of the Registrable Securities for resale by the Holders.
(c) UNDERWRITING. If the holders of Registrable Securities at
any time intend to distribute all or a part of the Registrable
Securities covered by the registration statement filed pursuant to this
SECTION 15.1 by means of an underwriting, they shall so advise the
Issuer and the Issuer shall promptly notify the other holders of
Registrable Securities of such underwriting. The Issuer (together with
all holders of Registrable Securities proposing to distribute their
18
securities pursuant to the underwriting) shall enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected by the Issuer. Notwithstanding any other
provision of this SECTION 15.1, if the underwriter advises the holders
of Registrable Securities in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Holders
requesting the underwriting shall so advise all holders of Registrable
Securities, and the number of shares included in the underwriting shall
be allocated among the holders of Registrable Securities requesting
registration in proportion, as nearly as practicable, to the total
number of Registrable Securities held by such holders at the time of
the request for an underwriting. If any holder of Registrable
Securities disapproves of the terms of the underwriting, such holder of
Registrable Securities may elect to withdraw from such underwritten
offering by written notice to the Issuer, the underwriter and the other
holders of Registrable Securities whose shares are being included in
the underwriting. The Issuer agrees to file any amendments or
supplements to the registration statement necessary in order to permit
any underwritten offering.
(d) RIGHTS IN ADDITION TO OTHER RIGHTS. The rights under this
SECTION 15.1 are in addition to, and not affected by, the holders' of
Registrable Securities exercise of any registration rights contained in
Section 15.2.
15.2 COMPANY REGISTRATION. If (but without any obligation to do
so) the Issuer proposes to register any of its stock or other securities under
the Securities Act in connection with the public offering of such securities
solely for cash (other than a registration effected at the request of one or
more stockholders of the Issuer (including, without limitation, any registration
effected pursuant to a contractual right of one or more stockholders to request
a registration) or relating solely to the sale of securities to participants in
a Company employee benefit plan or corporate reorganization or other transaction
covered by Rule 145 promulgated under the Securities Act, or a registration on
any form which does not permit secondary sales or include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Issuer shall, at such
time, promptly give each holder of Registrable Securities written notice of such
registration. Upon the written request of each holder of Registrable Securities
given within twenty (20) days after mailing of such notice by the Issuer the
Issuer shall, subject to the provisions of SECTION 15.6 hereof, cause to be
registered under the Securities Act all of the Registrable Securities that each
such Holder has requested to be registered.
15.3 OBLIGATIONS OF THE ISSUER. Whenever required under this
SECTION 15 to effect the registration of any Registrable Securities, the Issuer
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its reasonable and
diligent efforts to cause such registration statement to become
effective, and keep such registration statement effective (i) in the
case of a registration statement filed pursuant to SECTION 15.1, during
19
the Effectiveness Period (as hereinafter defined) or (ii) in the case
of a registration statement filed pursuant to SECTION 15.2, upon the
request of the holders of a majority of the Registrable Securities
registered thereunder, for up to one hundred twenty (120) days or, if
earlier, the date on which the distribution contemplated in the
registration statement has been completed. As used herein, the term
"EFFECTIVENESS PERIOD" shall mean until the earlier of (i) the
termination of the rights set forth in this Warrant Agreement in
accordance with SECTION 15.13 or (ii) all of the Registrable Securities
covered by the registration having been sold or a subsequent
registration statement covering any unsold Registrable Securities
having been declared effective.
(b) Provide, at least three (3) business days prior to filing,
any registration statement and included prospectus (including each
preliminary prospectus and any amendments or supplements thereto)
prepared in conformity with the requirements of the Securities Act in
connection with SECTIONS 15.1 and 15.2 (the "REGISTRATION MATERIALS")
to the holders of Registrable Securities and their respective counsel
for review and comment, if any.
(c) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement.
(d) Furnish to the holders of Registrable Securities such
number of copies of a prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such
other documents and Registration Materials as they may reasonably
request in order to facilitate the disposition of Registrable
Securities owned by them that are included in such registration.
(e) Use its reasonable and diligent efforts to register and
qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the holders of Registrable Securities;
PROVIDED, HOWEVER, that the Issuer shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(f) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such
offering. Each holder of Registrable Securities participating in such
underwriting shall also enter into and perform its obligations under
such agreement.
20
(g) Notify each holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event the result of which causes the prospectus
included in such registration statement, as then in effect, to include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; and
thereafter, the Issuer will use reasonable efforts to amend or
supplement such prospectus in order to cause such prospectus not to
include any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of circumstances then
existing; PROVIDED, however, that upon such notification by the Issuer,
the holders of Registrable Securities will not offer or sell
Registrable Securities until the Issuer has notified such holders that
it has prepared a supplement or amendment to such prospectus and
delivered copies of such supplement or amendment to such holders (it
being understood and agreed by the Issuer that the foregoing proviso
shall in no way diminish or otherwise impair the Issuer's obligations
to prepare a prospectus amendment or supplement as above provided in
this SECTION 15.3(g)).
(h) Use its reasonable and diligent efforts, if a registration
statement under SECTION 15.1 ceases to be effective for any reason at
any time during the Effectiveness Period (other than because of the
sale of all of the Registrable Securities registered thereunder or
pursuant to the Issuer's exercise of the Suspension Right (as
hereinafter defined)), to (i) obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and (ii) amend the registration
statement in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness of the shelf registration or
file an additional registration statement covering all of the unsold
Registrable Securities (a "SUBSEQUENT REGISTRATION STATEMENT"). If a
Subsequent Registration Statement is filed, the Issuer will use its
reasonable and diligent efforts to cause the Subsequent Registration
Statement to be declared effective as soon as practicable and to keep
such Subsequent Registration Statement continuously effective until the
end of the Effectiveness Period. The requirements of this SECTION
15.3(h) that the Issuer file additional registration statements shall
not be affected by the provisions set forth in SECTION 15.1 that the
Issuer is only required to file one registration statement under
SECTION 15.1.
(i) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar
securities issued by the Issuer are then listed.
(j) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective
date of such registration.
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(k) Use its reasonable and diligent efforts to furnish, at the
request of any Holder requesting registration of Registrable Securities
pursuant to this SECTION 15, on the date that such Registrable
Securities are delivered to the underwriters for sale in connection
with a registration statement pursuant to this SECTION 15, if such
securities are being sold through underwriters, or, if such securities
are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing
the Issuer for the purposes of such registration, in form and substance
as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the holders of
Registrable Securities requesting registration of the Registrable
Securities, and (ii) a letter dated such date, from the independent
certified public accountants of the Issuer, in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the holders of Registrable Securities
requesting registration of Registrable Securities.
(l) Notify each seller of Registrable Securities under such
registration statement of (i) the effectiveness of such registration
statement, (ii) the filing of any post-effective amendments to such
registration statement, or (iii) the filing of a supplement to such
registration statement.
15.4 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of
the Issuer to take any action pursuant to this SECTION 15 with respect
to the Registrable Securities of any selling holder of Registrable
Securities that such holder shall furnish to the Issuer such
information regarding itself, the Registrable Securities held by it,
and the intended method of disposition of such securities as shall be
required to effect the registration of such holder's Registrable
Securities.
(b) The Issuer shall have no obligation with respect to any
registration requested pursuant to SECTION 15.1 hereof if, as a result
of the application of subsection 1.5(a), the number of shares of the
Registrable Securities to be included in the registration does not
equal or exceed the number of shares required to originally trigger the
Issuer's obligation to initiate such registration as specified in
SECTION 15.1 hereof.
15.5 EXPENSES OF REGISTRATION. All expenses (other than
underwriting discounts and commissions, stock transfer taxes and fees of counsel
to the stockholders in excess of $15,000) incurred in connection with any
registrations, filings or qualifications of Registrable Securities pursuant to
SECTIONS 15.1 or 15.2 including (without limitation) all federal or state
registration, filing and qualification fees, printers' and accounting fees and
fees and disbursements of counsel for the Issuer shall be borne by the Issuer.
The Issuer shall pay up to an aggregate of $15,000 of the selling stockholders'
legal fees in connection with one (1) registration. Notwithstanding the
foregoing, the Issuer shall not be required to pay for any expenses of any
registration proceeding begun pursuant to SECTION 15.1 if the registration
22
request is subsequently withdrawn at the request of the holders of a majority of
the Registrable Securities to be registered, unless the withdrawal is based upon
a material adverse development concerning the Issuer and the holders of
Registrable Securities have withdrawn the request with reasonable promptness
following disclosure by the Issuer of such material adverse change.
15.6 UNDERWRITING REQUIREMENTS. In connection with any offering
pursuant to SECTION 15.2 involving an underwriting of shares of the Issuer's
capital stock by the Issuer, the Issuer shall not be required to include any of
the holders' Registrable Securities in such underwriting unless they accept the
terms of the underwriting as agreed upon between the Issuer and the underwriters
selected by it (or by other persons entitled to select the underwriters), and
then only in such quantity as the underwriters determine in their sole
discretion will not jeopardize the success of the offering by the Issuer. If the
total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Issuer that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Issuer shall
be required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their sole
discretion will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder, or in such other proportions as shall mutually be agreed to
by such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a limited liability company, partnership or
corporation, the members, partners, retired partners and stockholders of such
holder, or the estates and family members of any such members, partners and
retired partners and any trusts for the benefit of any of the foregoing persons
shall be deemed to be a single "selling stockholder," and any pro-rata reduction
with respect to such "selling stockholder" shall be based upon the aggregate
amount of shares carrying registration rights owned by all entities and
individuals included in such "selling stockholder," as defined in this sentence.
15.7 DELAY OF REGISTRATION. No holder of Registrable Securities
shall have any right to obtain or seek an injunction restraining or otherwise
delaying any such registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this SECTION 15.
15.8 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this SECTION 15:
(a) To the maximum extent permitted by law, the Issuer will
indemnify and hold harmless each holder of Registrable Securities, the
partners, officers, and directors of each such holder, any underwriter
(as defined in the Securities Act) for such holder and each person, if
any, who controls such holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages
or liabilities (joint or several) to which they may become subject,
under the Securities Act, the Exchange Act or any state securities law,
insofar as such losses, claims, damages or liabilities (or actions in
23
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "VIOLATION"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or
alleged violation by the Issuer of the Securities Act, the Exchange
Act, or any rule or regulation promulgated under the Securities Act or
the Exchange Act or any state securities law in connection with the
offering covered by such Registration Statement; and the Issuer will
pay to each such holder, partner, officer, director, underwriter or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 15.8(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent
of the Issuer (which consent shall not be unreasonably withheld or
delayed), nor shall the Issuer be liable to any such holder,
underwriter or controlling person for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such holder, partner, officer, director,
underwriter or controlling person.
(b) To the maximum extent permitted by law, each selling
holder will, if Registrable Securities held by such holder are included
in the applicable registration statement, indemnify and hold harmless
the Issuer, each of its directors, each of its officers who has signed
the registration statement, each person, if any, who controls the
Issuer within the meaning of the Securities Act, any underwriter, any
other holder selling securities in such registration statement and any
controlling person of any such underwriter or other holder, against any
losses, claims, damages or liabilities (joint or several) to which any
of the foregoing persons may become subject under the Securities Act or
the Exchange Act or any state securities law in connection with the
offering covered by such registration statement insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such holder expressly
for use in connection with such registration; and each such holder will
pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 15.8(b), in
connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection 15.8(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the
holder (which consent shall not be unreasonably withheld or delayed);
PROVIDED FURTHER, that in no event shall any indemnity under this
subsection 15.8(b) exceed the net proceeds from the offering received
by such holder, except in the case of willful misconduct or fraud by
such holder.
24
(c) Promptly after receipt by an indemnified party under this
SECTION 15.8 of notice of the commencement of any action (including any
governmental action) as to which indemnity may be sought hereunder,
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this SECTION 15.8, deliver to
the indemnifying party a written notice of the commencement thereof.
The indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; PROVIDED, HOWEVER,
that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have
the right to retain one separate counsel, with the reasonable fees and
expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this SECTION 15.8, but the
omission to so deliver written notice to the indemnifying party will
not relieve the indemnifying party of any liability that it may have to
any indemnified party otherwise than under this SECTION 15.8. No
indemnifying party, in the defense of any such claim or litigation,
shall, except upon the consent of each indemnified party, consent to
entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a full and unconditional release
from all liability in respect to such claim or litigation.
(d) The foregoing indemnity agreements of the Issuer and
holders of Registrable Securities are subject to the condition that,
insofar as they related to any Violation made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file
with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC
Rule 424(b) (the "FINAL Prospectus"), such indemnity agreement shall
not inure to the benefit of any person if a copy of the Final
Prospectus was furnished to the indemnified party and was not furnished
to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act. If the
indemnification provided for in this SECTION 15.8 is held by a court of
competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage or liability referred to herein,
then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability
25
in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on
the other in connection with the statements or omissions that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations; PROVIDED, HOWEVER, that in no event shall (i)
any contribution by a holder of Registrable Securities under this
subsection 15.8(d) exceed the net proceeds from the offering received
by such holder, except in the case of willful fraud by such holder, and
(ii) any person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) be entitled
to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
(f) The obligations of the Issuer and holders of Registrable
Securities under this SECTION 15.8 shall survive the completion of any
offering of Registrable Securities in a registration statement under
this SECTION 15, and otherwise.
15.9 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Issuer to register Registrable Securities pursuant to this SECTION 1 may be
assigned (but only with all related obligations) by a holder of Registrable
Securities to a transferee or assignee of such securities, including a
subsidiary, affiliate, partner, limited partner, retired partner or stockholder
of a holder of Registrable Securities, provided in each case that (i) the Issuer
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (ii) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Warrant Agreement; and (iii) such assignment shall be
effective only if immediately following such transfer the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act.
15.10 REPORTS UNDER THE EXCHANGE ACT. The Issuer agrees to use
commercially reasonable efforts: (a) to make and keep public information
available, as those terms are understood and defined in the General Instructions
to Form S-3, or any successor or substitute form, and in Rule 144, (b) to file
with the SEC in a timely manner all reports and other documents required to be
filed by an issuer of securities registered under the Securities Act or the
Exchange Act, (c) as long as any holder of Registrable Securities owns any
Registrable Securities, to furnish in writing upon such holder's request a
written statement by the Issuer that it has complied with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, and to
furnish to such holder a copy of the most recent annual or quarterly report of
the Issuer, and such other reports and documents so filed by the Issuer with the
SEC as may be reasonably requested.
26
15.11 DEFERRAL. Notwithstanding anything in this Warrant Agreement
to the contrary, if the Issuer shall furnish to the holders of Registrable
Securities a certificate signed by the Chief Executive Officer of the Issuer
stating that the Board of Directors of the Issuer has made the good faith
determination (a) that continued use by the Holders of a registration statement
for purposes of effecting offers or sales of Registrable Securities pursuant
thereto would require, under the Securities Act, premature disclosure in the
registration statement (or the prospectus relating thereto) of material,
nonpublic information concerning the Issuer, its business or prospects or any
proposed material transaction involving the Issuer, (b) that such premature
disclosure would be materially adverse to the Issuer, its business or prospects
or any such proposed material transaction or would make the successful
consummation by the Issuer of any such material transaction significantly less
likely and (c) that it is therefore essential to suspend the use by such holders
of any such registration statement (and the prospectus relating thereto) for
purposes of effecting offers or sales of Registrable Securities pursuant
thereto, then the right of such holders to use any such registration statement
(and the prospectus relating thereto) for purposes of effecting offers or sales
of Registrable Securities pursuant thereto shall be suspended until further
notice by the Issuer (the "SUSPENSION PERIOD"). During the Suspension Period,
none of the holders of Registrable Securities shall offer or sell any
Registrable Securities pursuant to or in reliance upon any such registration
statement (or the prospectus relating thereto). In the event the Issuer
exercises the suspension rights set forth herein (the "SUSPENSION RIGHT"), such
suspension will continue for such period of time reasonably necessary for
disclosure to occur at a time that is not materially detrimental to the Issuer
or until such time as the registration statement does not include any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, each as determined in
good faith by the Issuer. The Issuer agrees to notify the holders of Registrable
Securities promptly upon termination of the Suspension Right. Notwithstanding
the foregoing, under no circumstances shall the Issuer be entitled to exercise
the Suspension Right for a period of more than thirty (30) days during any
twelve (12) month period.
15.12 LIMITATION OF LIABILITY. The Issuer shall not be liable to
the holder of Registrable Securities for a failure to effect, or a delay in
effecting, a registration hereunder or a default in any other obligations under
this Warrant Agreement arising out of or relating to any failure to receive
necessary consents from its independent auditors or any internal review,
investigation or similar activity by the Issuer's Audit Committee.
15.13 TERMINATION OF REGISTRATION RIGHTS. The rights granted under
this SECTION 15 shall terminate upon the fourth anniversary of the date of this
Warrant Agreement. In addition, a holder of Registrable Securities' registration
rights shall terminate if all Registrable Securities held by and issuable to
such holder may be sold under Rule 144 during any ninety (90) day period.
27
Section 16 AMENDMENTS, WAIVERS AND SURVIVAL. Any provision of this
Warrant Agreement may be amended, supplemented, waived, discharged or terminated
by a written instrument signed by the Issuer and the Warrant Holders holding not
less than a majority of the outstanding Warrants and Non-Public Warrant Shares,
voting as a single group.
Section 17 NOTICES.
17.1 Any notice or demand to be given or made by the Warrant
Holders or the holders of Warrant Shares to or on the Issuer pursuant to this
Warrant Agreement shall be sufficiently given or made if actually delivered or
sent by registered mail, return receipt requested, postage prepaid, addressed to
the Issuer at the Warrant Office.
17.2 Any notice to be given by the Issuer to the Warrant Holders
or the holders of Warrant Shares shall be sufficiently given or made if actually
delivered or sent by registered mail, return receipt requested, postage prepaid,
addressed to such holder as such holder's name and address shall appear on the
Warrant Register or the Common Stock registry of the Issuer, as the case may be.
Section 18 EXPENSES. The Issuer shall pay all costs and expenses
(including, without limitation, reasonable attorneys' fees) incurred by the
Warrant Holders in connection with (a) the preparation, negotiation and exercise
of rights under this Warrant Agreement and the Warrant Certificates, (b) any
amendment, modification or supplement of this Warrant Agreement or the Warrant
Certificates, and (c) any waiver by the Warrant Holders of any provision under
this Warrant Agreement or the Warrant Certificates. If any action at law or in
equity is necessary to enforce or interpret the terms of this Warrant Agreement,
the prevailing party shall be entitled to reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
Section 19 BINDING AGREEMENT. This Warrant Agreement shall be
binding upon and inure to the benefit of the Issuer and the Holder and their
successors and assigns; PROVIDED, HOWEVER, that the Issuer shall not assign its
rights or obligations under this Warrant Agreement or any Warrant Certificate
without the prior written consent of the Warrant Holders.
Section 20 COUNTERPARTS. This Warrant Agreement may be executed in
one or more separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument. Delivery of an
executed counterpart of this Warrant Agreement by telefacsimile shall be equally
as effective as delivery of a manually executed counterpart of this Warrant
Agreement. Any party delivering an executed counterpart of this Warrant
Agreement by telefacsimile shall also deliver a manually executed counterpart of
this Warrant Agreement, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability and binding effect of
this Warrant Agreement.
28
Section 21 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVERS.
This Warrant Agreement shall be governed by and construed under the laws of the
State of Delaware as applied to agreements among Delaware residents entered into
and to be performed entirely within Delaware. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with respect to this
Warrant Agreement or for the recognition and enforcement of any judgment in
respect hereof brought by the other party hereto or its successors or assigns
will be brought and determined in the Chancery or other courts of the State of
Delaware, and each of the parties hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each
of the parties hereto hereby irrevocably waives, and agrees not to assert, by
way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Warrant Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), (c) to the fullest extent permitted by applicable law, that (i) the
suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action, or proceeding is improper and (iii)
this Warrant Agreement, or the subject matter hereof, may not be enforced in or
by such courts and (d) any right to trial by jury.
Section 22 BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this
Warrant Agreement shall be construed to give to any Person other than the Issuer
and the registered Warrant Holders (and with respect to SECTION 15 the other
indemnitees thereunder) any legal or equitable right, remedy or claim under this
Warrant Agreement.
Section 23 VOTING AND CONSENTS TO BE ON A FULLY CONVERTED BASIS.
Wherever this Warrant Agreement calls for the written consent or vote of any
combination of the holders of the Warrants and the Non-Public Warrant Shares,
voting as a single group, the Warrants shall be counted as if they had been
exercised for Warrant Shares.
[SIGNATURE PAGE FOLLOWS]
29
SIGNATURE PAGE TO WARRANT AGREEMENT
IN WITNESS WHEREOF the parties hereto have caused this Warrant
Agreement to be duly executed and delivered by their proper and duly authorized
officers, as of the date and year first above written.
CRDENTIA CORP.
By: /S/ JAMES D.DURHAM
-------------------------------
James D. Durham
Chief Executive Officer
SIGNATURE PAGE TO WARRANT AGREEMENT
BRIDGE OPPORTUNITY FINANCE, LLC
By: /S/ RANDY ABRAHMS
-----------------------------
Randy Abrahams
Chief Executive Officer
------------------------------------------
EXHIBIT A
TO WARRANT AGREEMENT
FORM OF WARRANT CERTIFICATE
------------------------------------------
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES FOR WHICH THE
WARRANTS ARE EXERCISABLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SUCH ACT OR LAW. SUCH WARRANTS AND SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE
WITH THE CONDITIONS SPECIFIED IN AND ARE SUBJECT TO OTHER PROVISIONS OF THE
WARRANT AGREEMENT DATED AS OF AUGUST 31, 2004, BETWEEN THE ISSUER AND BRIDGE
OPPORTUNITY FINANCE, LLC, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE FURNISHED TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RIGHTS MORE
FULLY SET FORTH IN THE WARRANT AGREEMENT.
EXERCISABLE ONLY ON OR BEFORE
AUGUST 31, 2014
This Warrant Certificate is one of the Warrant Certificates referred to in the
Warrant Agreement dated as of August 31, 2004 (the "WARRANT AGREEMENT"), between
CRDENTIA CORP., a Delaware corporation (the "ISSUER") and BRIDGE OPPORTUNITY
FINANCE, LLC. Such Warrant Agreement is hereby incorporated in full by reference
and made a part of this instrument and is hereby referred to for a description
of the rights, limitation of rights, obligations, duties and immunities
thereunder of the Issuer and the holders. All defined terms used in this Warrant
Certificate that are not otherwise defined herein shall have the meanings
ascribed to them in the Warrant Agreement.
This Warrant Certificate certifies that BRIDGE OPPORTUNITY FINANCE, LLC, or its
registered assigns, is the registered holder of 905,758 Warrants (the
"WARRANTS") to purchase shares of Common Stock of the Issuer. Each Warrant
evidenced hereby entitles the holder hereof, subject to the conditions set forth
herein and in the Warrant Agreement, to purchase from the Issuer before the
first to occur of (i) a Change of Control (as defined in the Warrant Agreement,
or (ii) 5:00 P.M., Chicago, Illinois time, on August 31, 2014 (the "EXPIRATION
DATE"), one (1) Validly Issued share of the Common Stock of the Issuer (the
"WARRANT SHARE") to the extent set forth in the Warrant Agreement, at a price of
the lesser of (i) Three Dollars and 15/100 ($3.15) per Warrant, or (ii) the Fair
Market Value per Warrant (such lesser amount per Warrant, the "EXERCISE PRICE"),
upon surrender of this Warrant Certificate, execution of the annexed Form of
Election to Purchase and payment of the Exercise Price at the office of the
Issuer at Warrant Office. The Exercise Price and number of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment as set forth
in the Warrant Agreement.
Exhibit A
Page 1
No Warrant may be exercised after 5:00 P.M., Chicago, Illinois time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00 P.M.,
Chicago, Illinois time, on the Expiration Date.
The Issuer may deem and treat the registered holders of the Warrants evidenced
hereby as the absolute owners thereof (notwithstanding any notation of ownership
or other writing hereon made by anyone), for the purpose of any exercise hereof
and of any distribution to the holders hereof and for all other purposes, and
the Issuer shall not be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the Warrant Office by the registered
holder hereof in person or by a legal representative duly authorized in writing,
may be exchanged, in the manner and subject to the limitations provided in the
Warrant Agreement, but without payment of any service charge, for another
Warrant Certificate or Warrant Certificates of like tenor evidencing in the
aggregate a like number of Warrants.
Upon due presentment for registration of a transfer of this Warrant Certificate
at the Warrant Office, a new Warrant Certificate or Warrant Certificates of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
in exchange for this Warrant Certificate to the transferee(s) and, if less than
all of the Warrants evidenced hereby are to be transferred thereunder, to the
registered holder hereof, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
[SIGNATURE PAGE FOLLOWS]
Exhibit A
Page 2
(SIGNATURE PAGE TO WARRANT CERTIFICATE)
IN WITNESS WHEREOF the Issuer has caused this Warrant Certificate to be
signed by its duly authorized officers and has caused its corporate seal to be
affixed hereunto.
CRDENTIA CORP.
By: /S/ JAMES D. DURHAM
-----------------------------
James D. Durham
Chief Executive Officer
Exhibit A
Page 3
------------------------------------
ANNEX 1
TO FORM OF WARRANT CERTIFICATE
FORM OF ELECTION TO PURCHASE
------------------------------------
ELECTION TO PURCHASE
(TO BE EXECUTED UPON EXERCISE OF WARRANT)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ Warrant Shares and
herewith tenders payment for such Warrant Shares to the order of the Issuer in
the amount of $_______________ in accordance with the terms hereof. The
undersigned requests that a certificate for such Warrant Shares be registered in
the name of _______________________________________________ whose address is
_____________________________________ and that such certificate be delivered to
___________________ whose address is ________________________. If said number of
Warrant Shares is less than all of the Warrant Shares purchasable under this
Warrant Certificate, the undersigned requests that a new Warrant Certificate
representing the remaining balance of the Warrant Shares be registered in the
name of ______________________ whose address is ___________________________ and
that such Warrant Certificate be delivered to _________________________ whose
address is ___________________________________.
Signature:
_________________________________________
(Signature must conform in all respects to
name of holder as specified on the
face of the Warrant Certificate.)
Date: ___________________________________
Annex 1
Page 1
------------------------------------
EXHIBIT B
TO WARRANT AGREEMENT
WARRANT REGISTER
------------------------------------
WARRANT REGISTER
Warrant Original Number Number of Names and
Certificate of Warrants and Warrants Addresses of
Number Warrant Shares Exercised Warrant Holders
Exhibit B
Page 1
SCHEDULE 2.6
TO WARRANT AGREEMENT
Capitalization of Issuer
Reference is made to additional shares of Common Stock issuable in connection
with that certain Agreement and Plan of Reorganization, dated as of June 19,
2003, by and among the Issuer, Baker Anderson Christie, Inc., BAC Acquisition
Corporation and certain stockholders of Baker Anderson Christie, Inc., as
amended by that certain Amendment No. 1 made and entered into effective as of
July 31, 2003.
Reference is made to additional shares of Common Stock issuable in connection
with that certain Agreement and Plan of Reorganization, dated as of July 16,
2003, by and among the Issuer, Nurses Network, Inc., NNI Acquisition Corporation
and certain shareholders of Nurses Network, Inc., as amended by Amendment No. 1
made and entered into effective as of September 9, 2003.
Reference is made to certain registration rights granted in connection with that
certain Agreement and Plan of Reorganization, dated as of September 15, 2003, by
and among the Issuer, New Age Staffing, Inc., NAS Acquisition Corporation and
the shareholders of New Age Staffing, Inc.
Reference is made to the $910,000 in original principal amount of certain
Convertible Subordinated Promissory Notes issued by the Issuer.
Reference is made to (i) additional shares of Common Stock issuable in
connection with, (ii) $2,725,000 in original principal amount of certain
Convertible Subordinated Promissory Notes issued in connection with, and (iii)
certain registration rights granted in connection with, that certain Agreement
and Plan of Reorganization, dated as of November 4, 2003, by and among the
Issuer, PSR Acquisition Corporation, PSR Holdings Acquisition Corporation, PSR
Nurse Recruiting, Inc. and PSR Nurses Holdings Corp.
Reference is made to certain purchase rights set forth in that certain Common
Stock Purchase Agreement dated May 15, 2002 by and between the Issuer and the
parties thereto.
Reference is made to options to purchase up to 2,333,333 shares of the Issuer's
Common Stock (as adjusted for the 1-for-3 reverse stock split effected by the
Issuer on June 28, 2004 (the "Reverse Split") granted to the Issuer's Chairman
and Chief Executive Officer, on December 31, 2003 and a bonus agreement executed
in connection therewith.
Reference is made to options to purchase up to 66,666 shares of the Issuer's
Common Stock (as adjusted for the Reverse Split) granted to two members of the
Issuer's Board of Directors.
Schedule 2(d)
Page 1
Reference is made an option to purchase up to 206,074 shares of the Issuer's
Common Stock (as adjusted for the Reverse Split) granted by the Issuer to its
President, on December 16, 2003. Reference is further made to a certain
Executive Employment Agreement by and between the Issuer and its President dated
on or about December 16, 2003, pursuant to which the Issuer will be grant one or
more options to purchase a number of shares of the Issuer's Common Stock equal
to five and two hundred and ninths percent (5.209%) of that aggregate number of
(a) additional shares of Common Stock issued in connection with any Acquisition
(as defined therein), plus (b) subject to certain limitations, the aggregate
maximum number of additional shares of Common Stock issuable pursuant to any
security convertible or exchangeable into Common Stock, or any warrant, option,
purchase right or similar agreement or arrangement granted in connection with
such Acquisition (whether or not such shares are ever issued but excluding any
compensatory options or other equity-based incentives granted to service
providers on or after the closing date of such Acquisition).
Reference is made to options to purchase 441,666 shares of Common Stock granted
pursuant to the Issuer's 2004 Stock Incentive Plan, and the remaining 358,334
shares of Common Stock reserved for Issuance under the Issuer's 2004 Stock
Incentive Plan.
Reference is made to certain registration rights granted pursuant to that
certain Amended and Restated Registration Rights Agreement, dated as of June 16,
2004 by and between the Issuer and MedCap Partners L.P.
Reference is made to an option to purchase 110,504 shares of the Issuer's Common
Stock (as adjusted for the Reverse Split) issued by the Issuer to its Chief
Financial Officer.
Reference is made to the dividend rights of the Issuer's Series A Preferred
Stock, the Series B Preferred Stock, Series B-1 Preferred Stock and Series C
Preferred Stock.
Reference is made to the registration rights granted pursuant to that certain
Registration Rights Agreement, dated as of August 9, 2004, by and between the
Issuer and the investors listed on Schedule A thereto.
Reference is made to the option to purchase 866,666 shares of Issuer's common
stock granted to the Issuer's Chief Executive Officer.
Reference is made to the option to purchase 433,333 shares of the Issuer's
common stock granted to the Issuer's President.
Reference is made to shares of Common Stock issued and/or issuable in connection
with that certain Agreement and Plan of Reorganization, dated as of August 31,
2004, by and among the Issuer, CRDE Corp., AHHC Acquisition Corporation, Arizona
Home Health Care/Private Duty, Inc. and certain stockholders of Arizona Home
Health Care/Private Duty, Inc.
Reference is made to 50,000 shares of Series C Preferred Stock issued and/or
issuable in connection with the Issuer's Series C Preferred Stock financing.
Schedule 2(d)
Page 2
Reference is made to warrants to purchase 125,000 shares of Series C Preferred
Stock issued and/or issuable in connection with the Issuer's Series C Preferred
Stock financing.
References is made to that certain warrant to purchase 6,000 shares of Series
B-1 Preferred Stock granted to MedCap Partners L.P.
Schedule 2(d)
Page 3
SCHEDULE 3
TO WARRANT AGREEMENT
ISSUER CLOSING DATE CAPITALIZATION
NO. OF SHARES**
---------------
Common Stock 6,343,091
Series A Preferred Stock 4,583,333 (1)
Series B Preferred Stock 2,083,333 (2)
Series B-1 Preferred Stock 4,640,300 (3)
Series C Preferred Stock 12,541,900 (4)
TOTAL 30,191,957
_________________________
** Set forth on an as-if-converted to common stock basis.
(1) Includes 4,583,333 shares of common stock issuable upon conversion of
2,750,000 shares of Series A Preferred Stock.
(2) Includes 2,083,333 shares of common stock issuable upon conversion of
6,250,000 shares of Series B Preferred Stock.
(3) Includes (i) 4,040,300 shares of common stock issuable upon conversion
of 40,403 shares of Series B-1 Preferred Stock; and (ii) 600,000 shares
of common stock issuable upon conversion of 6,000 shares of Series B-1
Preferred Stock issuable to MedCap Partners L.P. upon the exercise of a
warrant to purchase shares of Series B-1 Preferred Stock.
(4) Includes (i) 3,583,400 shares of common stock issuable upon conversion
of 35,834 shares of Series C Preferred Stock to be issued in connection
with the Series C Preferred Stock financing; and (ii) 8,958,500 shares
of common stock issuable upon conversion of 89,585 shares of Series C
Preferred Stock, which shares are issuable upon the exercise of
warrants issued in connection with the proposed Series C Preferred
Stock financing.
Schedule 3
Page 1