WARRANT AGREEMENT

 

EXHIBIT 10.3

 

                                WARRANT AGREEMENT

 

THESE   SECURITIES AND THE SECURITIES   ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN

REGISTERED   UNDER THE SECURITIES   ACT OF 1933 AND MAY NOT BE TRANSFERRED   UNLESS

COVERED BY AN   EFFECTIVE   REGISTRATION   STATEMENT   UNDER SAID ACT, A "NO ACTION"

LETTER   FROM   THE   SECURITIES   AND   EXCHANGE   COMMISSION   WITH   RESPECT   TO SUCH

TRANSFER,   A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND

EXCHANGE COMMISSION,   OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE

EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

 

                           Union Dental Holdings, Inc.

 

                             WARRANT NO. August 101

 

                             Dated: August 17, 2005

 

 

Union Dental Holdings, Inc., a corporation organized under the laws of the State

of Florida (the   "Company"),   hereby   certifies   that,   for value   received from

Dutchess Private Equities Fund, II, L.P.,   ("Holder"),   is entitled,   subject to

the terms set forth   below,   to   purchase   from the Company up to a total of One

million   three   hundred   and   four   thousand    three   hundred   and   forty   eight

(1,304,348)   shares of Common   Stock,   $.0001 par value per share   (the   "Common

Stock"), of the Company (each such share, a "Warrant Share" and all such shares,

the "Warrant   Shares") at an exercise price equal to Fixed   Conversion Price (as

defined in the Debenture Agreement).   The Warrant may be exercised on a cashless

basis anytime after issuance   through and including the fifth (5th)   anniversary

of its issuance (the   "Expiration   Date"),   subject to the   following   terms and

conditions:

 

     1. Registration of Warrant.   The Company shall register this Warrant,   upon

records   to be   maintained   by   the   Company   for   that   purpose   (the   "Warrant

Register"),   in the name of the   record   Holder   hereof   from time to time.   The

Company may deem and treat the registered Holder of this Warrant as the absolute

owner hereof for the purpose of any exercise   hereof or any   distribution to the

Holder,   and for all other   purposes,   and the Company   shall not be affected by

notice to the contrary.

 

     2. Registration of Transfers and Exchanges.

 

          (a) The   Company   or the   transfer   agent   shall   enter or record   the

     transfer   of any   portion of this   Warrant in the   Warrant   Register,   upon

     surrender of this   Warrant to the   Transfer   Agent or to the Company at the

     office specified in or pursuant to Section 3(b). Upon any such registration

     or transfer,   a new warrant to purchase Common Stock, in substantially   the

     form of this Warrant (any such new warrant,   a "New   Warrant"),   evidencing

 

 

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     the   portion   of   this   Warrant   so   transferred   shall   be   issued   to the

     transferee   and a New   Warrant   evidencing   the   remaining   portion of this

     Warrant not so   transferred,   if any,   shall be issued to the   transferring

     Holder.   The acceptance of the New Warrant by the transferee   thereof shall

     be deemed   the   acceptance   of such   transferee   of all of the   rights   and

     obligations of a holder of a Warrant.

 

          (b) This Warrant is   exchangeable,   upon the   surrender   hereof by the

     Holder to the office of the   Company   specified   in or   pursuant to Section

     3(b) for one or more New Warrants, evidencing in the aggregate the right to

     purchase   the   number   of   Warrant   Shares   which   may   then   be   purchased

     hereunder. Any such New Warrant will be dated the date of such exchange.

 

     3. Duration and Exercise of Warrants.

 

          (a) This Warrant shall be exercisable by the registered   Holder on any

     business day before 5:00 P.M.,   Boston   time,   at any time and from time to

     time on or after the date hereof to and including the   Expiration   Date. At

     5:00 P.M.,   Boston time on the Expiration Date, the portion of this Warrant

     not exercised prior thereto shall be and become void and of no value. Prior

     to the Expiration   Date, the Company may not call or otherwise   redeem this

     Warrant without the prior written consent of the Holder.

 

          (b)   Subject   to   Sections   2(b),   6 and 10,   upon   surrender   of this

     Warrant,   with   the Form of   Election   to   Purchase   attached   hereto   duly

     completed and signed, to the Company at its address for notice set forth in

     Section 12 and upon payment of the Exercise Price   multiplied by the number

     of Warrant   Shares that the Holder   intends to purchase   hereunder,   in the

     manner   provided   hereunder,   all as specified by the Holder in the Form of

     Election to Purchase,   the Company   shall   promptly   (but in no event later

     than 5 business days after the Date of Exercise (as defined   herein)) issue

     or cause to be issued   and   cause to be   delivered   to or upon the   written

     order of the Holder and in such name or names as the Holder may   designate,

     a certificate for the Warrant Shares   issuable upon such exercise,   free of

     restrictive   legends   except (i)   either in the event   that a   registration

     statement   covering the resale of the Warrant   Shares and naming the Holder

     as a selling   stockholder   thereunder is not then   effective or the Warrant

     Shares are not freely transferable without volume restrictions   pursuant to

     Rule 144(k)   promulgated   under the Securities Act of 1933, as amended (the

     "Securities   Act"), or (ii) if this Warrant shall have been issued pursuant

     to a written   agreement   between the original   Holder and the   Company,   as

     required   by such   agreement.   Any   person so   designated   by the Holder to

     receive   Warrant   Shares shall be deemed to have become holder of record of

     such   Warrant   Shares   as of the   Date   of   Exercise   (as   defined   in this

     subsection) of this Warrant.   A "Date of Exercise"   means the date on which

 

 

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     the Company   shall have   received (i) this Warrant (or any New Warrant,   as

     applicable),   with the Form of   Election to   Purchase   attached   hereto (or

     attached to such New Warrant) appropriately   completed and duly signed, and

     (ii)   payment of the   Exercise   Price for the   number of Warrant   Shares so

     indicated by the holder hereof to be purchased.

 

          (c) This Warrant shall be exercisable, either in its entirety or, from

     time to time, for a portion of the number of Warrant   Shares.   If less than

     all of the Warrant   Shares   which may be   purchased   under this Warrant are

     exercised at any time,   the Company   shall issue or cause to be issued,   at

     its expense,   a New Warrant   evidencing the right to purchase the remaining

     number of Warrant   Shares for which no exercise has been   evidenced by this

     Warrant.   In the event the Common Stock   representing the Warrant Shares is

     not delivered per the written   instructions   of the   Purchaser,   within ten

     (10)   business days after the Notice of Election and Warrant is received by

     the Company (the "Delivery Date"), then in such event the Company shall pay

     to Holder   one-half   percent   (0.5%) in cash,   of the   dollar   value of the

     Warrant   Shares to be issued per each day after the Delivery   Date that the

     Warrant Shares are not delivered. The Company acknowledges that its failure

     to deliver the Warrant Shares by the Delivery Date will cause the Holder to

     suffer    damages   in   an   amount   that   will   be   difficult   to   ascertain.

     Accordingly,   the parties agree that it is   appropriate   to include in this

     Warrant a provision for liquidated   damages.   The parties   acknowledge   and

     agree   that the   liquidated   damages   provision   set forth in this   section

     represents   the parties' good faith effort to quantify such damages and, as

     such,   agree   that the form   and   amount   of such   liquidated   damages   are

     reasonable   and will not   constitute a penalty.   The payment of   liquidated

     damages shall not relieve the Company from its   obligations   to deliver the

     Common Stock pursuant to the terms of this Warrant.   The Company shall make

     any payments   incurred under this Section 3 in immediately   available funds

     within ten (10) business   days from the date of issuance of the   applicable

     Warrant Shares.   Nothing herein shall limit Holder's right to pursue actual

     damages or cancel the Notice of Election for the Company's failure to issue

     and deliver   Common Stock to the Holder   within   fifteen (15) business days

     following the Delivery Date.

 

     4. Registration Rights. During the term of this Warrant, the Company agrees

to use its best efforts to file,   within thirty (30) calendar days of the demand

by Holder, a registration   statement with the Securities and Exchange Commission

covering   the   resale of the   Warrant   Shares and naming the Holder as a selling

stockholder    thereunder    (unless   the   Warrant   Shares   are   otherwise   freely

transferable   without volume   restrictions   pursuant to Rule 144(k) or Rule 144A

promulgated   under the Act).   The   registration   rights   granted   to the   Holder

pursuant to this Section shall continue until all of the Holder's Warrant Shares

 

 

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have been sold in accordance   with an effective   registration   statement or upon

the   Expiration   Date.   The   Company   will   pay   all   registration   expenses   in

connection therewith.

 

     5.   Payment of Taxes.   The   Company   will pay all   documentary   stamp taxes

attributable   to the   issuance   of   Warrant   Shares   upon the   exercise   of this

Warrant;   provided,   however,   that the Company shall not be required to pay any

tax that may be payable in respect of any transfer   involved in the registration

of any   certificates for Warrant Shares or Warrants in a name other than that of

the Holder. The Holder shall be responsible for all other tax liability that may

arise as a result of holding or transferring   this Warrant or receiving   Warrant

Shares upon exercise hereof.

 

     6. Replacement of Warrant.   If this Warrant is mutilated,   lost,   stolen or

destroyed,   the   Company   shall   issue or cause to be   issued   in   exchange   and

substitution for and upon   cancellation   hereof,   or in lieu of and substitution

for this Warrant,   a New Warrant,   but only upon receipt of evidence   reasonably

satisfactory to the Company of such loss, theft or destruction and indemnity, if

requested,   satisfactory   to   it.   Applicants   for   a   New   Warrant   under   such

circumstances   shall also   comply   with such other   reasonable   regulations   and

procedures and pay such other reasonable charges as the Company may prescribe.

 

     7. Reservation of Warrant Shares. The Company covenants that it will at all

times   reserve and keep   available out of the   aggregate of its   authorized   but

unissued   Common   Stock,   solely for the purpose of enabling it to issue Warrant

Shares upon exercise of this Warrant as herein   provided,   the number of Warrant

Shares which are then issuable and deliverable   upon the exercise of this entire

Warrant,   free from preemptive   rights or any other actual   contingent   purchase

rights of persons other than the Holder (taking into account the adjustments and

restrictions   of Section 8. The Company   covenants   that all Warrant Shares that

shall be so issuable and deliverable shall, upon issuance and the payment of the

applicable   Exercise   Price in   accordance   with the terms   hereof,   be duly and

validly authorized, issued and fully paid and nonassessable. If the Company does

not have a   sufficient   amount of Common   Stock   authorized   to reserve   for the

Warrant Shares, it shall use its best efforts to place before shareholder vote a

proposal to increase the number of its   authorized   shares as soon as reasonably

practicable.

 

     8. Certain   Adjustments.   The Exercise   Price and number of Warrant   Shares

issuable upon   exercise of this Warrant are subject to   adjustment   from time to

time as set forth in this Section 8. Upon each such   adjustment   of the Exercise

Price   pursuant   to this   Section 8, the Holder   shall   thereafter   prior to the

Expiration   Date be entitled to purchase,   at the Exercise Price   resulting from

such   adjustment,   the number of Warrant   Shares   obtained   by   multiplying   the

Exercise Price in effect   immediately   prior to such adjustment by the number of

Warrant Shares issuable upon exercise of this Warrant   immediately prior to such

adjustment and dividing the product thereof by the Exercise Price resulting from

such adjustment.

 

 

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          (a) If the Company, at any time while this Warrant is outstanding, (i)

     shall pay a stock dividend (except scheduled   dividends paid on outstanding

     preferred stock as of the date hereof which contain a stated dividend rate)

     or otherwise make a distribution or   distributions   on shares of its Common

     Stock or on any   other   class of   capital   stock and not the   Common   Stock

     payable in shares of Common Stock,   (ii)   subdivide   outstanding   shares of

      Common Stock into a larger number of shares,   or (iii) combine   outstanding

     shares of Common Stock into a smaller number of shares,   the Exercise Price

     shall be   multiplied   by a   fraction   of which the   numerator   shall be the

     number of   shares   of Common   Stock   (excluding   treasury   shares,   if any)

     outstanding   before   such event and of which the   denominator   shall be the

     number of   shares   of Common   Stock   (excluding   treasury   shares,   if any)

     outstanding   after such event. Any adjustment made pursuant to this Section

     shall   become   effective    immediately    after   the   record   d