THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT.
Void after 5:00 p.m., Mountain Standard Time, January 24, 2005.
Warrant to Purchase 75,000
Shares of Common Stock
WARRANT TO PURCHASE COMMON STOCK
PARADIGM MEDICAL INDUSTRIES, INC.
This is to certify that, FOR VALUE RECEIVED,
JOHN W. HEMMER
or registered assigns (the "Holder"), is entitled to purchase, subject to the
provisions of this Warrant, from Paradigm Medical Industries, Inc., a Delaware
Corporation (the "Company"), at any time on or after January, 2000, and not
later than 5:00 p.m., Mountain Standard Time, on January 24, 2005, 75,000 shares
of common stock, $.001 par value of the Company (the "Common Stock") at a
purchase price of $7.50 per share. The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be paid for a share
of Common Stock may be adjusted from time to time as hereinafter set forth. The
shares of the Common Stock deliverable upon such exercise, and as adjusted from
time to time, are referred to as "Warrant Stock" and the exercise price of a
share of Common Stock in effect at any time and as adjusted from time to time is
referred to as the "Exercise Price."
1. Exercise of Warrant. Subject to the provisions of hereof, this
Warrant may be exercised in whole or in part at any time or from time to time on
or after January 24, 2000 by tender to the Company the Purchase Form annexed
hereto, duly executed and accompanied by payment of the Exercise Price for the
number of shares specified in such form, together with all federal and state
taxes applicable upon such exercise. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the right of the holder to purchase
the balance of the shares purchasable hereunder. Upon receipt by the Company of
this Warrant at the office or agency of the Company, in proper form for
exercise, the Holder shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
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transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
the Holder.
2. Reservation of Shares. The Company shall reserve for issuance and/or
delivery upon exercise of this Warrant such number of shares of its Common Stock
as shall be required for issuance or delivery upon exercise of this Warrant.
3. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share.
4. Exchange, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company for other Warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. The term "Warrant" as
used herein includes any Warrants issued in substitution for or replacement of
this Warrant, or into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification including a surety bond,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date. Any such new
Warrant executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Adjustment of Exercise Price. The Exercise Price of Each Warrant
shall be subject to adjustment from time to time as follows:
(a) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the Exercise Price of
a Warrant shall be appropriately decreased so that the number of shares of
Common Stock issuable on exercise of such Warrant shall be increased in
proportion to such increase of outstanding shares.
(b) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
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shares of Common Stock, then, on the effective date of such combination, the
Exercise Price of a Warrant shall be appropriately increased so that the number
of shares of Common Stock issuable on exercise of a Warrant shall be decreased
in proportion to such decrease in outstanding shares.
(c) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Company (other than
as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Company with or into another
person (other than a consolidation or merger in which the Company is the
continuing entity and which does not result in any change in the Common Stock),
or of the sale or other disposition of all or substantially all the properties
and assets of the Company, the Warrants shall, after such reorganization,
reclassification, consolidation, merger, sale or other disposition, be
convertible into the kind and number of shares of stock or other securities or
property of the Company or otherwise to which such holder would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation, merger, sale or other disposition he had converted his Warrants
into Common Stock. The provisions of this clause (c) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(d) All calculations under this paragraph 6 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as the case
may be.
(e) Minimal Adjustments. No adjustment in the Exercise Price
need be made if such adjustment would result in a change in the Exercise Price
of less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Exercise Price.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this paragraph (f),
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Warrants a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon written request at any time of any holder of
Warrants, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Exercise Price of
such series at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the exercise of the Warrants.
(g) Reservation of Stock Issuable Upon Exercise. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the exercise of the
Warrants such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of all outstanding Warrants; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
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sufficient to effect the exercise of all then outstanding Warrants, the Company
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
(h) Reclassification, Reorganization or Merger. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other distribution or of a
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Company shall cause effective provision to be made so that the holder shall have
the right thereafter, by exercising this Warrant to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant and shall expressly provide that the issuer of
securities to be thereafter received on exercise of this Warrant assumes
obligations for registration of the Warrant and Warrant Stock issuable on
exercise of the Warrant substantially in accordance with the provisions of
Section 1 of this Warrant. The foregoing provisions of this Section shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(i) Dissolution. In case of a dissolution, liquidation, or
winding up of the Company, all purchase rights under this Warrant shall
terminate at the close of business on the date as of which holders of record of
the Common Stock shall be entitled to participate in a distribution of the
assets of the Company in connection with such dissolution, liquidation or
winding up. Any Warrant not exercised prior to such time shall be void and no
rights shall exist thereunder. In any such case of termination of purchase
rights, a statement thereof shall be included in the notice required by this
Warrant.
7.01 Definitions. As used in this Paragraph 7:
(a) The terms "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of the effectiveness of
such registration statement.
(b) The term "Registrable Securities" means (i) the Common Stock issued
or issuable pursuant to the exercise of the Warrants and (ii) any Common Stock
of the Company issued or issuable in respect of such Common Stock or other
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securities issued or issuable pursuant to the exercise of the Warrants upon any
stock split, stock dividend, recapitalization, or similar event, or any Common
Stock otherwise issued or issuable with respect to the Warrants. Notwithstanding
anything set forth above, the above-described securities shall not be treated as
Registrable Securities if and so long as they (A) have been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, or (B) have been sold (or are available for sale in the opinion of
counsel to the Company and market conditions would permit the sale of such
shares within a 90 day period) pursuant to Rule 144(k) in a transaction exempt
from the registration and prospectus delivery requirements of the Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale.
(c) The term "Holder" means any holder holding Registrable Securities
or the Shares (and any person holding Shares or Registrable Securities to whom
the registration rights have been transferred pursuant to paragraph 9 hereof).
(d) The term "SEC" means the Securities and Exchange Commission or any
successor agency thereto.
7.02 Registration Rights. The Company shall file a registration
statement with the SEC to register the shares of Common Stock issuable to the
Holder upon conversion of this Warrant within forty-five (45) days of the
initial closing of the Company's offering (the "Offering") of shares of Series D
Convertible Preferred Stock (the "Series D Preferred Stock"), and will keep such
registration statement current until such time as the shares of Common Stock
issuable upon conversion of the shares of Series D Preferred Stock offered in
the Offering are freely tradeable pursuant to Rule 144(k) promulgated under the
Securities Act of 1933, as amended, all at the Company's cost and expense
(except commissions or discounts and attorney's fees and costs of the Holder).
Additionally, the Holder will have the right to demand the registration of the
shares issuable upon exercise of this Warrant beginning six months after the
closing of a public offering of the Company's securities if such Warrant is not
exercised during the period in which the registration statement for the shares
of Common Stock issuable upon conversion of the notes in the Offering is kept
current and such shares are not otherwise registered.
7.03 Company Registration.
(a) If at any time, or from time to time, the Company shall determine
to register any of its securities, either for its own account or for the account
of a security holder or holders, other than a registration relating solely to
employee benefit plans, or a registration on Form S-4 relating solely to an SEC
Rule 145 transaction, or a registration on any other form (other than Form S-1,
S-3, SB-1 or SB-2) which does not include substantially the same information as
would be required to be included in a registration statement covering the sale
of Registrable Securities, the Company will:
(i) promptly give to each Holder written notice thereof;
and
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(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein (if the Holder so desires), all the Registrable Securities
specified in any written request or requests by any Holder or Holders received
by the Company within twenty (20) days after such written notice is received on
the same terms and conditions as the Common Stock, if any, otherwise being sold
through the underwriter in such registration.
(b) If the registration that the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to paragraph
7.3(a). All Holders desiring to distribute their securities through such
underwriting, if any, (together with the Company and the other holders
distributing their securities through such underwriting) shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company.
(c) Notwithstanding any other provision of this paragraph 7.03, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriter may limit the Registrable
Securities or other securities to be included in the registration; provided,
however, that if such registration is other than the first registered offering
of the Company's securities to the public, the underwriter may not limit the
Registrable Securities to be included in such registration to less than 30% of
the securities included therein (based on aggregate market values). Any
reduction by the underwriter of the number of Registrable Securities or other
securities to be included in such registration shall be made in the following
manner: initially, shares of Common Stock held by the founders or other members
of the Company's management shall be excluded from such underwritten public
offering to the extent required by the underwriter, and if a further reduction
in the number of shares is required, the Company shall so advise all Holders and
other holders distributing their securities through such underwriting and the
number of shares of Registrable Securities and other securities that may be
included in the registration and underwriting shall be allocated among the
holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities and other securities contractually entitled to
registration with the offering held by such Holders and other holders at the
time of filing of the Registration Statement. To facilitate the allocation of
shares in accordance with the above provisions, the Company may round the number
of shares allocated to any Holder or holder to the nearest 100 shares. The
Company shall advise all Holders of Registrable Securities which would otherwise
be registered and underwritten pursuant hereto of any such limitations, and the
number of shares of Registrable Securities that may be included in the
registration. If any Holder or holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any securities excluded or withdrawn
from such underwriting shall not be transferred in a public distribution prior
to ninety (90) days after the effective date of the registration statement
relating thereto, or such shorter period of time as the underwriters may
require.
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(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this paragraph 7.03 prior to the
effectiveness of such registration whether or not any Holder has elected to
register securities in such registration.
7.04 Registration on Form S-3. If any Holder or Holders request that
the Company file a registration statement on Form S-3 (or any successor form to
Form S-3) for a public offering of shares of the Registrable Securities the
reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $500,000, and the Company
is a registrant entitled to use Form S-3 to register the Registrable Securities
for such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
paragraph 7.04 in any twelve (12) month period. The substantive provisions of
paragraph 7.03 shall be applicable to each registration initiated under this
paragraph 7.04.
7.05 Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to this Paragraph 7,
including, without limitation, all registration, filing and qualification fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, accounting fees and expenses, and expenses of any special audits
incidental to or required by such registration, shall be borne by the Company;
provided, however, that the Company shall not be required to pay stock transfer
taxes or underwriters' fees, discounts or commissions relating to Registrable
Securities, or fees of counsel for the selling shareholders.
7.06 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, and the distribution proposed by
such Holder or Holders, as the Company may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Paragraph 7.
7.07 Sale Without Registration. If at the time of any transfer of any
Registrable Securities, such Registrable Securities shall not be registered
under the Act, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee furnish to the Company (a) such
information as is necessary in order to establish that such transfer may be made
without registration under the Act, and (b) (if the transfer is not made in
compliance with Rule 144 other than a transfer not involving a change in
beneficial ownership or a pro rata distribution by a partnership to its
partners) at the expense of the Holder or transferee, an opinion of counsel
satisfactory to the Company in form and substance to the effect that such
transfer may be made without registration under the Act; provided that nothing
contained in this paragraph 7.09 shall relieve the Company from complying with
any request for registration, qualification, or compliance made pursuant to the
other provisions of this Paragraph 7.
7.08 Market Stand-off Agreement. The Holders, if requested by the
Company and an underwriter of Common Stock (or other securities) of the Company,
shall agree not to sell or otherwise transfer or dispose of any Securities held
by the Holders during the ninety (90) day period following the effective date of
a registration statement covering an initial public offering of the Company's
securities filed under the Act provided that:
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(a) such agreement shall only apply to the first such
registration statement of the Company filed after the date of this Warrant
including shares of Common Stock (or other securities) to be sold on its behalf
to the public in an underwritten offering; and
(b) all Holders holding more than one percent of the
outstanding Common Stock, all officers and directors of the Company and all
other holders of registration rights of the Company (whether or not pursuant to
this agreement) enter into similar agreements. Such agreement shall be in
writing in the form satisfactory to the Company and such underwriter. The
Company may impose stop-transfer instructions with respect to the Securities
subject to the foregoing restriction until the end of the foregoing period.
7.09 Amendment of Registration Rights. With the written consent of the
Holders of a majority of the then outstanding Registrable Securities (including
securities exercisable for or convertible into Registrable Securities), the
Company may amend this Paragraph 7, or enter into an agreement with any holder
or prospective holder of any securities of the Company which would allow such
holder or prospective holder to include such securities as Registrable
Securities under this Paragraph 7.
7.10 Termination of Registration Rights. The demand rights provided for
in this Paragraph 7 shall be exercisable only between January 24, 2000 and
January 24, 2005.
8. Transfer to Comply with the Securities Act 1933.
(a) This Warrant or the Warrant Stock or any other security
issued or issuable upon exercise of this Warrant may not be offered or sold
except in compliance with the Securities Act of 1933, as amended, and then only
against receipt of an agreement of such person to whom such offer of sale is
made to comply with the provisions of this Section 9 with respect to any resale
or other disposition of such securities.
(b) The Company may cause the following legend to be set forth
on each certificate representing Warrant Stock or any other security issued or
issuable upon exercise of this Warrant not theretofore distributed to the public
or sold to underwriters for distribution to the public pursuant to Section 1
hereof, unless counsel for the Company is of the opinion as to any such
certificate that such legend is unnecessary:
The securities represented by this certificate may not be offered for
sale, sold or otherwise transferred except pursuant to an effective
registration statement made under the Securities Act of 1933 (the
"Act"), or pursuant to an exemption from registration under the Act,
the availability of which is to be established to the satisfaction of
the Company.
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9. Applicable Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
Paradigm Medical Industries, Inc.
By _____________________________________
Thomas F. Motter, President and Chief
Executive Officer
ATTEST:
By:_____________________________
Randall A. Mackey, Secretary
Date: January 24, 2000.
[SEAL]
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PURCHASE FORM
Date __________________
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________ shares of Common Stock and hereby
makes payment of $__________ in payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_________________________________________________________________________
(please typewrite or print in block letters)
Address_______________________________________________________________________
Signature______________________________
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ASSIGNMENT FORM
FOR VALUE RECEIVED ___________________________________________________
hereby sells, assigns and transfers unto
Name ___________________________________________________________________________
(please typewrite or print in block letters)
Address ______________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint _________________________________________ attorney, to
transfer the same on the books of the Company with full power of substitution in
the premises.
Signature _____________________________
Date: _____________________
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