FORM OF FIRST AMENDMENT TO PURCHASE WARRANT
This FIRST AMENDMENT TO PURCHASE WARRANT ("Amendment") is made as of this
1st day of June, 2004 by and between FONAR CORPORATION, a Delaware corporation
(the "Company"), and _________________ ("Holder").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Purchase Agreement ("Purchase Agreement")
dated as of May 24, 2001 by and between the Company and THE TAILWIND FUND LTD,
and the instructions of Roan/Xxxxxx Associates, L.P., the Company issued to the
Holder on May 24, 2001, a purchase warrant ("Warrant") expiring May 24, 2006 to
purchase 100,000 shares of the Company's Common Stock, par value $0.0001 per
share ("Common Stock"), which Warrant provides for adjustment of the Warrant
Price and number of unexercised Warrant Shares remaining under Warrant due to
issuances of Common Stock by the Company in accordance with the terms set forth
therein; capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed thereto in the Warrant;
WHEREAS, the 100,000 Warrant Shares initially underlying the Warrant were
registered for resale pursuant to a registration statement (file no. 333-63782)
originally filed with the SEC under the Securities Act of 1933, as amended
("Securities Act"), on June 25, 2001 and declared effective November 1, 2001
("Registration Statement"); and
WHEREAS, in lieu of effectuating adjustments to the Warrant due to past
issuances of Common Stock by the Company, the parties desire to amend the terms
of the Warrant as provided herein;
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants set forth in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Amendments. Notwithstanding anything contained in the Warrant, the
Warrant shall be amended as follows:
(a) Warrant Price. The Warrant Price under the Warrant shall equal $0.79
per share of Common Stock of the Company, subject to further adjustment in
accordance with the terms of the Warrant as amended hereby;
(b) Warrant Shares. The number of unexercised Warrant Shares remaining
under the Warrant as of the date hereof shall equal 151,625 Warrant Shares; the
parties acknowledge that none of the Warrant Shares have been exercised;
(c) Adjustment for Securities Issuances. Clauses 9(d)(A) and 9(d)(B) (and
the colon preceding such clauses) shall be deleted in their entirety and
replaced with the following:
"the Warrant Price, then in each such case, the Warrant Price in
effect immediately prior to such issue or sale shall be
automatically reduced effective concurrently with such issue or
sale to an amount determined by multiplying the Warrant Price
then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issue or sale, plus (2) the number of
shares of Common Stock which the aggregate consideration received
by the Company for such additional shares would purchase at the
Warrant Price, and (y) the denominator of which shall be the
number of shares of Common Stock of the Company outstanding
immediately after such issue or sale."
In addition, the second sentence of the second paragraph of 9(d) reading,
"For purposes of the preceding paragraph, in the event that the effective
purchase price is less than both the Fair Market Value and the Warrant Price,
then the calculation method which yields the greatest downward adjustment in the
Warrant Price shall be used," shall be deleted.
(d) Term. The term of the Warrant shall be extended three (3) years such
that the Expiration Date under the Warrant shall be May 24, 2009.
(e) Beneficial Ownership Cap. The Restricted Ownership Percentage in
Section 18(a) shall be reduced from 9.9% to 4.9%. All of Section 18(b) shall be
deleted except for the last paragraph.
(f) Additional Exclusion from Adjustments. Section 9(d) shall be amended to
provide that neither the price nor number of Warrant Shares covered by this
Warrant shall be adjusted by any issuance of up to 1,500,000 shares of the
Company's Common Stock to the stockholders of Advanced Medical Diagnostics
Corporation, a majority-owned subsidiary of Fonar ("AMD"), in exchange for their
shares of stock of AMD (which shall not be a capital raising transaction).
(g) No Liability for Not Giving Notice. The Company shall have no liability
to the Holder for failure in the past to notify the Holder of any adjustments to
the price or number of Warrant Shares that may have resulted from past issuances
of Common Stock by the Company, whether under the terms of the Warrant, the
Purchase Agreement, the Registration Rights Agreement or otherwise (provided
that this provision shall not affect liability for adjustment notices required
in the future).
2. Replacement Warrant. The Company agrees to promptly execute and deliver
to the Holder a replacement Warrant reflecting the foregoing amendments in
substitution of the originally issued Warrant, the form of which replacement
Warrant is attached hereto as Exhibit A. The Company shall deliver such
replacement Warrant to the Holder's counsel or as otherwise directed by the
Holder promptly following the return to the Company of the originally issued
Warrant. Notwithstanding any delay in the exchange of the replacement Warrant
for the original Warrant, the amendment contained herein shall become effective
upon the execution and delivery of this Amendment.
3. Registration Rights.
(a) Prospectus Supplement. Within three (3) business days following the
date hereof, the Company shall, at its sole cost and expense and in accordance
with the Securities Act, file a prospectus supplement to the Registration
Statement with the SEC covering the changes to the Warrant described herein.
(b) Registration Rights. In the event that there are an insufficient number
of shares remaining covered by Registration Statement, the Company shall, at its
sole cost and expense and in accordance with the Securities Act, use its best
efforts (1) to promptly file and have declared effective a resale registration
statement on the appropriate form under the Securities Act with the SEC covering
all additional Warrant Shares issued or issuable upon exercise of the Warrant
which are not covered by the Registration Statement, and (2) to keep such
registration statement current and effective until all such shares covered
thereby are available for resale pursuant to Rule 144(k) under the Securities
Act, or until such earlier date as all such shares covered thereby shall have
been sold ("Registration Period"). All the terms and conditions of the
Registration Rights Agreement dated as of May 24, 2001 by and between the
Company and the Holder ("Registration Rights Agreement"), shall apply mutatis
mutandis to the registration of such Warrant Shares and the continued
registration of Warrant Shares under the Registration Statement, including
without limitation the indemnification and contribution provisions contained
therein, and all such terms are incorporated by reference herein, provided that
(a) the Registration Date for any such new registration statement shall mean the
date which is six (6) months following the date on which counsel to either the
Company or Holder makes a reasonable determination that an insufficient number
of shares remain covered by the Registration Statement, and (b) the
"Registration Period" with respect to such new registration statement shall have
the meaning set forth in the previous sentence.
(c) Amendment to Registration Rights Agreement. The Registration Rights
Agreement is hereby amended such that the "Registration Period" as defined
therein shall continue from the date hereof until all such shares covered
thereby are available for resale pursuant to Rule 144(k) under the Securities
Act or until such earlier date as all such shares covered by the applicable
Registration Statement have been sold.
(a) Full Force and Effect. Except as otherwise expressly provided herein,
each of the Purchase Agreement, the Registration Rights Agreement, the Warrant,
the First and Second Amendments to Callable Warrant, and the other agreements
and transactions contemplated thereby shall remain in full force and effect, to
the extent they are presently in force, provided, however, that to the extent
any provision thereof is inconsistent with any of the terms of this Amendment,
the provisions of this Amendment will apply.
(b) Consent to Jurisdiction, Etc. Each of the Company and Holder agree that
any legal action or proceeding relating to or arising out of or under this
Amendment may be brought in the state or federal courts in the State of New
York, County of New York, and each party accepts with regard to any such action
or proceeding for itself and in respect to its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each party further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified U.S. mail, postage prepaid, to it at its addresses
provided in the Purchase Amendment, such service to become effective upon
receipt or five (5) days after such mailing, whichever shall first occur. To the
fullest extent permitted by applicable law, each party hereby waives, and agrees
not to assert, by way of motion, defense, counterclaim or otherwise, in any such
suit, action or proceeding any claim that (i) it is not personally subject to
the jurisdiction of any of the above-named courts by reason of any immunity or
otherwise, (ii) its properties are exempt or immune from setoff, execution or
attachment, either prior to judgment or in aid of execution or (iii) any suit,
action or proceeding so brought is in an inconvenient forum or that the venue of
the suit, action or proceeding is improper or that the subject matter hereof may
not be enforced in or by such courts.
(c) Authority. Each party hereto hereby represents and warrants to the
other party that the execution and delivery by such party of this Amendment, and
the performance by such party of its obligations hereunder, have been duly and
validly authorized by such party, with no other action on the part of such party
being necessary. This Amendment has been duly and validly executed and delivered
by such party and constitutes a legal, valid and binding obligation of such
party enforceable against such party in accordance with its terms.
(d) Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of New York.
(e) Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally, by courier or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the addresses or facsimile numbers set forth
in the Purchase Agreement.
(f) Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. This Amendment may be
executed by facsimile.
(g) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Amendment and the consummation of the
transactions contemplated hereby.
(h) Assignment; Successors. Neither Holder nor the Company may assign this
Amendment or its respective rights or obligations hereunder without the prior
written consent of the other, which may not be unreasonably withheld or delayed.
This Amendment shall be binding upon the Company's successors.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be duly executed as of the date first written above.
By: /s/Xxxxxxx X. Xxxxxxxx
Xxxxxxx Xxxxxxxx, M.D.,