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Exhibit 10.3
THIS
WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. EXCEPT AS OTHERWISE SET FORTH
HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF JUNE
2, 2008, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER SAID ACT
OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE,
CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS
SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SUCH
ACT.
Right
to Purchase 20,000,000 Shares of Common Stock, par value $.001
per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT , for value received, New Millennium
Capital Partners II, LLC or its registered assigns, is entitled to
purchase from Pediatric Prosthetics,
Inc., an Idaho corporation (the “ Company ”), at
any time or from time to time during the period specified in
Paragraph 2 hereof, 20,000,000 fully paid and nonassessable
shares of the Company’s Common Stock, par value $.001 per
share (the “ Common Stock ”),
at an exercise price per share equal to $.001 (the “
Exercise
Price ”). The term “Warrant
Shares,” as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4
hereof. The term “Warrants” means this
Warrant and the other warrants issued pursuant to that certain
Securities Purchase Agreement, dated June 2, 2008, by and among the
Company and the Buyers listed on the execution page thereof (the
“ Securities
Purchase Agreement ”).
This
Warrant is subject to the following terms, provisions, and
conditions:
1.
Manner of Exercise;
Issuance of Certificates; Payment for Shares.
Subject to the provisions
hereof, this Warrant may be exercised by the holder hereof, in
whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the
“Exercise Agreement”), to the Company during normal
business hours on any business day at the Company’s principal
executive offices (or such other office or agency of the Company as
it may designate by notice to the holder hereof), and upon
(i) payment to the Company in cash, by certified or official
bank check or by wire transfer for the account of the Company of
the Exercise Price for the Warrant Shares specified in
the
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Exercise
Agreement or (ii) if the resale of the Warrant Shares by the holder
is not then registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the “
Securities
Act ”), delivery to the Company of a written notice of
an election to effect a “Cashless Exercise” (as defined
in Section 11(c) below) for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such
holder’s designee, as the record owner of such shares, as of
the close of business on the date on which this Warrant shall have
been surrendered, the completed Exercise Agreement shall have been
delivered, and payment shall have been made for such shares as
set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding five (5)
business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in
such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name
as shall be designated by such holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant
has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant
representing the number of shares with respect to which this
Warrant shall not then have been exercised. In addition
to all other available remedies at law or in equity, if the Company
fails to deliver certificates for the Warrant Shares within five
(5) business days after this Warrant is exercised, then the Company
shall pay to the holder in cash a penalty (the
“Penalty”) equal to 2% of the number of Warrant Shares
that the holder is entitled to multiplied by the Market Price (as
hereinafter defined) for each day that the Company fails to deliver
certificates for the Warrant Shares. For example, if the
holder is entitled to 100,000 Warrant Shares and the Market Price
is $2.00, then the Company shall pay to the holder $4,000 for each
day that the Company fails to deliver certificates for the Warrant
Shares. The Penalty shall be paid to the holder by the
fifth day of the month following the month in which it has
accrued.
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Notwithstanding
anything in this Warrant to the contrary, in no event shall
the holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of
Warrants (or portions thereof) upon exercise of which the sum
of (i) the number of shares of Common Stock beneficially owned
by the holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the
ownership of the unexercised Warrants and the unexercised or
unconverted portion of any other securities of the Company
(including the Notes (as defined in the Securities Purchase
Agreement)) subject to a limitation on conversion or exercise
analogous to the limitation contained herein) and (ii) the
number of shares of Common Stock issuable upon exercise of the
Warrants (or portions thereof) with respect to which the
determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more
than 4.9% of the outstanding shares of Common
Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and Regulation 13D-G thereunder, except
as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary
contained herein, the limitation on exercise of this Warrant
set forth herein may not be amended without (i) the written
consent of the holder hereof and the Company and (ii) the
approval of a majority of shareholders of the
Company.
2.
Period
of Exercise . This Warrant is
exercisable at any time or from time to time on or after the date
on which this Warrant is issued and delivered pursuant to the terms
of the Securities Purchase Agreement and before 6:00 p.m., New
York, New York time on the seventh (7 th
) anniversary of the date of issuance (the “Exercise
Period”).
3.
Certain
Agreements of the Company .
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The
Company hereby covenants and agrees as follows:
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(a)
Shares
to be Fully Paid . All
Warrant Shares will, upon issuance in accordance with the terms of
this Warrant, be validly issued, fully paid, and nonassessable and
free from all taxes, liens, and charges with respect to the issue
thereof.
(b)
Reservation
of Shares . During
the Exercise Period, the Company shall at all times have
authorized, and reserved for the purpose of issuance upon exercise
of this Warrant, a sufficient number of shares of Common Stock
to provide for the exercise of this Warrant.
(c)
Listing
.
The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon
each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to
official notice of issuance upon exercise of this Warrant) and
shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all shares of Common Stock from time
to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such
listing of, any other shares of capital stock of the Company
issuable upon the exercise of this Warrant if and so long as any
shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d)
Certain
Actions Prohibited . The
Company will not, by amendment of its charter or through any
reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed by it
hereunder, but will at all times in good faith assist in the
carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the
holder of this Warrant in order to protect the exercise privilege
of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this
Warrant. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise Price then in effect, and (ii) will take all
such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable
shares of Common Stock upon the exercise of this
Warrant.
(e)
Successors
and Assigns . This
Warrant will be binding upon any entity succeeding to the Company
by merger, consolidation, or acquisition of all or
substantially all the Company’s assets.
4. Antidilution
Provisions .
During
the Exercise Period, the Exercise Price and the number of Warrant
Shares shall be subject to adjustment from time to time as provided
in this Paragraph 4.
In
the event that any adjustment of the Exercise Price as
required herein results in a fraction of a cent, such Exercise
Price shall be rounded up to the nearest cent.
(a)
Adjustment
of Exercise Price and Number of Shares upon Issuance of Common
Stock . Except as
otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and
whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b)
hereof is deemed to have issued or sold, any shares of Common Stock
for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the
Market Price on the date of issuance (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by multiplying
the Exercise Price in effect immediately prior to the Dilutive
Issuance by a fraction, (i) the numerator of which is an amount
equal to the sum of (x) the number of shares of Common Stock
actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as
set forth in Paragraph 4(b) hereof, received by the Company upon
such Dilutive Issuance divided by the Market Price in effect
immediately prior to the Dilutive Issuance, and (ii) the
denominator of which is the total number of shares of Common Stock
Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
(b)
Effect
on Exercise Price of Certain Events . For
purposes of determining the adjusted Exercise Price under Paragraph
4(a) hereof, the following will be applicable:
(i)
Issuance
of Rights or Options . If the
Company in any manner issues or grants any warrants, rights or
options, whether or not immediately exercisable, to subscribe for
or to purchase Common Stock or other securities convertible into or
exchangeable for Common Stock (“Convertible
Securities”) (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to
as “ Options ”) and
the price per share for which Common Stock is issuable upon the
exercise of such Options is less than the Market Price on the date
of issuance or grant of such Options, then the maximum total number
of shares of Common Stock issuable upon the exercise of all such
Options will, as of the date of the issuance or grant of such
Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For
purposes of the preceding sentence, the “price per share for
which Common Stock is issuable upon the exercise of such
Options” is determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or
upon the conversion or exchange of Convertible Securities issuable
upon exercise of such Options.
(ii)
Issuance
of Convertible Securities . If the
Company in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same
are issuable upon the exercise of Options) and the price per share
for which Common Stock is issuable upon such conversion or exchange
is less than the Market Price on the date of issuance, then the
maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as
of the date of the issuance of such Convertible Securities, be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of
the preceding sentence, the “price per share for which Common
Stock is issuable upon such conversion or exchange” is
determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the conversion or exchange of all such Convertible
Securities. No further adjustment to the Exercise Price
will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii)
Change
in Option Price or Conversion Rate . If there
is a change at any time in (i) the amount of additional
consideration payable to the Company upon the exercise of any
Options; (ii) the amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such
change will be readjusted to the Exercise Price which would have
been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at
the time initially granted, issued or sold.
(iv)
Treatment
of Expired Options and Unexercised Convertible Securities
.
If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or
exchange of any Convertible Securities is not, in fact, issued and
the rights to exercise such Option or to convert or exchange such
Convertible Securities shall have expired or terminated, the
Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual
number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v)
Calculation
of Consideration Received . If any
Common Stock, Options or Convertible Securities are issued, granted
or sold for cash, the consideration received therefor for purposes
of this Warrant will be the amount received by the Company
therefor, before deduction of reasonable commissions, underwriting
discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible
Securities are issued or sol
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