Document:

Exhibit 10.7 to Nature Vision, Inc. Form 10-K for fiscal year ended December 31, 2005

Exhibit 10.7

NATURE VISION, INC.

INCENTIVE OPTION AGREEMENT

          This
incentive option agreement (this “Agreement”)
among Nature Vision, Inc., f/k/a Photo Control Corporation, a Minnesota
corporation (the “Company”) and
Jeffrey P. Zernov (the “Optionee”),
takes effect on August 31, 2004, (the “Grant
Date”). Subject to the terms and conditions of this Agreement, the
Company hereby grants to the Optionee an option (the “Option”) under the Company’s 2004 Stock Incentive Plan
(the “Plan”) to purchase 87,206 shares of Common
Stock (the “Shares”). 

	
 

	
 

	
 

	
1.

	
Incentive Stock Option. The Option shall be
  an Incentive Stock Option, as that term is used and defined in the Plan.

	
 

	
 

	
2.

	
Purchase Price. The purchase price of the
  Shares shall be $0.89 per Share, which is not less than the Fair Market Value
  of the Shares as of the Grant Date.

	
 

	
 

	
3.

	
Period of Exercise. The Option will expire
  on the May 25, 2008, (the “Expiration Date”). The Option may be exercised
  only while the Optionee is actively engaged in providing services to the
  Company as an Eligible Employee and as otherwise provided in Section 6 of
  this Agreement.

	
 

	
 

	
4.

	
Vesting Schedule. 87,206 Shares will vest
  and may be purchased in accordance with the terms of this Agreement on the
  Grant Date.

	
 

	
 

	
5.

	
Transferability. The Option is not
  transferable except by will or the laws of descent and distribution and may
  only be exercised during the lifetime of the Optionee by the Optionee.

	
 

	
 

	
6.

	
Termination of Services. Except as otherwise
  agreed to by the Company and the Optionee in writing, in the event that the
  Optionee ceases to provide services to the Company as an Eligible Employee,
  the Optionee may purchase Shares which have vested under Section 4 in the
  three months following the date of the termination, subject to the following:
  

	
 

	
 

	
 

	
 

	
(a)

	
If the
  Optionee’s employment was terminated due to the Optionee’s Retirement or
  Total Disability, the Optionee may purchase Shares which have vested under
  Section 4 in the 12 months following the date of the termination. 

	
 

	
 

	
 

	
 

	
(b)

	
If the
  Optionee dies, the Option may be exercised (to the extent exercisable by the
  Optionee at the date of death) by the legal representative of the Optionee or
  by a person who acquired the right to exercise the Option by bequest or
  inheritance or by reason of the death of the Optionee, but the Option must be
  exercised within one year after the date of the Optionee’s death.

	
 

	
 

	
 

	
 

	
(c)

	
If the
  Optionee’s employment was terminated by the Company for cause, as determined
  by the Administrator in his, her or its sole discretion, the Option and all
  of the Optionee’s rights under this Agreement shall terminate immediately.

	
 

	
 

	
 

	
 

	
(d)

	
Notwithstanding
  the foregoing, in no event may any Shares be purchased after the Expiration
  Date. 

	
 

	
 

	
 

	
7.

	
Right to Terminate. Nothing in the Option or
  in any agreement entered into pursuant to the Option will interfere with or
  limit in any way the right of the Company to terminate the employment or
  service of any Eligible Employee at any time, nor confer upon any Eligible
  Employee any right to continue in the employ or service of the Company.

	
 

	
 

	
8.

	
No Rights of Shareholders.
  The Optionee does not have any dividend rights, voting rights or other rights
  or privileges of a shareholder with respect to any Shares covered by the
  Option until the date of issuance of a stock certificate for such Shares. No
  adjustment shall be made for cash dividends or other rights for which

	
 

	
 

	
 

	
 

	
the record
  date is before the date of such an issuance, except as expressly provided in
  the Plan.

	
 

	
 

	
9

	
Method of Exercise. 

	
 

	
 

	
 

	
(a)

	
The Option
  may be exercised and Shares may be purchased by the Optionee’s delivery of
  written notice to the Company in the form attached to this Agreement as Exhibit A (each, an “Exercise
Notice”). Each Exercise Notice
  must be accompanied by (i) payment of the full purchase price of the Shares
  to be purchased, in such form or combination of forms as described in this
  Section 9, and, if applicable, (ii) proof of the right to exercise the Option
  and purchase Shares if the exercise and purchase are pursuant to the terms
  described in Sections 6(a) and (b) of this Agreement. 

	
 

	
 

	
 

	
 

	
(b)

	
As soon as
  practicable after the Administrator has concluded, in his, her or its sole
  and absolute discretion that the Optionee has fully satisfied the conditions
  described in Section 9(a) (and if applicable Section 12), the Company will
  cause the number of such Shares so exercised under the Option to be issued
  and will deliver certificates representing the number of such Shares,
  registered in the name of the Optionee or other such person designated by the
  Optionee’s Beneficiary if the Option was exercised in accordance with Section
  6(b). 

	
 

	
 

	
 

	
 

	
(c)

	
When
  exercising the Option and purchasing Shares, the Optionee may make payment in
  one of the following ways: (i) in cash, or by check payable to the Company;
  (ii) if so authorized by the Administrator, by a promissory note made by the
  Optionee in favor of the Company which is (A) upon such terms and conditions
  determined by the Administrator, (B) bearing interest at a rate sufficient to
  avoid imputed interest under the Code, and (C) secured by the Shares so
  exercised and purchased in compliance with applicable law (including, without
  limitation, state corporate law and federal margin requirements); or (ii) by
  shares of Common Stock already owned by the Optionee; provided, however,
  that the Administrator in his, her, or its absolute discretion may limit the
  Optionee’s ability to exercise the Option by delivering shares of Common
  Stock, and any shares of Common Stock so delivered which were initially
  acquired upon exercise of the Option or another stock option agreement with
  the Company must have been owned by the Optionee at least six months as of
  the date of delivery. 

	
 

	
 

	
 

	
10.

	
Withholding. In any case where withholding
  is required or advisable under federal, state or local law in connection with
  any exercise and purchase of Shares by the Optionee, as a condition to the
  issuance of such Shares the Company is authorized to withhold appropriate
  amounts from amounts payable to the Optionee to cover such tax withholding or
  may require the Optionee to remit to the Company an amount equal to such
  appropriate amounts. 

	
 

	
 

	
11.

	
Changes in Capitalization, Dissolution, Liquidation and
  Reorganization. This Agreement is subject to modification
  upon the occurrence of certain events as described in Section 8.2 of the
  Plan.

	
 

	
 

	
12.

	
Investment Representation. The Optionee acknowledges and agrees that the
  Company may condition the exercise and purchase of any Shares pursuant to
  this Agreement on the Optionee’s delivery to the Company of the following if
  a registration statement under applicable securities laws is not in effect
  with respect to any Shares issued at the time the Optionee exercises the
  Option: (a) an investment representation from the Optionee in a form
  acceptable to the Company’s counsel; (b) a restrictive legend on any
  certificates issued for the Shares in a form acceptable to the Company’s
  counsel; and (c) a stop order with the Company or its transfer agent.

	
 

	
 

	
13.

	
Incorporation of the Plan. This Agreement is
  made in accordance with the terms and conditions of the Plan, which is
  incorporated into this Agreement by reference. Terms used but not otherwise
  defined in this Agreement have the meanings ascribed to them in the Plan. In
  the event of a conflict between the provisions of the Plan and the provisions
  of this Agreement, the provisions of the Plan shall control and govern. The
  Optionee acknowledges that he or she has read the Plan and agrees to be bound
  by its terms.

	
 

	
 

	
14.

	
Severability. In the event any provision of
  this Agreement shall be held illegal or invalid for any reason, the
  illegality or invalidity shall not affect the remaining parts of this
  Agreement, and this Agreement shall be construed and enforced as if the illegal
  or invalid provision had not been included.

2

	
 

	
 

	
15.

	
Choice of Law and Venue. This Agreement is
  made under and must be governed by the laws of the State of Minnesota,
  without regard to conflict of laws principles. The Company and the Optionee
  each consent to venue any suit or action under or with regard to this
  Agreement in an appropriate court with jurisdiction in Hennepin County,
  Minnesota.

	
 

	
 

	
16.

	
Entire Agreement. This
  Agreement constitutes the entire agreement of the parties with respect to the
  subject matter hereof and supercedes all prior understandings and statements,
  written and oral.

	
 

	
 

	
17.

	
Compliance with the Code. The Option is
  intended to qualify as an “incentive stock option” under Code Section 422. If
  any provision of this Agreement is susceptible to more than one
  interpretation, such interpretation shall be given thereto as is consistent
  with the Option being treated as an incentive stock option under the Code.

	
 

	
 

	
18.

	
$100,000 Limitation. Notwithstanding
  anything to the contrary contained in this Agreement, to the extent that the
  total Fair Market Value (determined as of the date of grant of an option) of
  Shares with respect to which the Option and any other incentive stock options
  granted by the Company becomes exercisable for the first time during any
  calendar year exceeds $100,000, such option(s) shall be treated as a
  Nonstatutory Stock Option(s). This Section 18 shall be applied by taking
  options into account in the order in which they were granted.

	
 

	
 

	
19.

	
Change of Control. The Optionee and the
  Company have certain rights and owe certain obligations in connection with
  certain change of control “Events,” which are fully described in Section 8.4
  of the Plan. 

	
 

	
 

	
 

	
The parties
  have executed this Agreement to be made effective as of the Grant Date.

	
 

	
 

	
 

	
 

	
 

	
NATURE VISION, INC.

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
/s/ Michael
  Day

	
 

	
 

	

	

	
 

	
Name:

	
 

	
Michael Day

	
 

	
 

	

	

	
 

	
Title:

	
 

	
Chief
  Executive Officer

	
 

	
 

	

	

	
 

	
 

	
 

	
 

	
 

	
OPTIONEE

	
 

	
 

	
 

	
 

	
/s/ Jeffrey
  P. Zernov

	
 

	

	

	
 

	
Jeffrey P.
  Zernov

3

Exhibit A

FORM OF NOTICE OF EXERCISE OF STOCK OPTION ISSUED

UNDER NATURE VISION, INC.’S 2004 STOCK INCENTIVE PLAN

	
 

	
 

	
To:

	
Secretary

	
 

	
Nature
  Vision, Inc.

	
 

	
213 NW
  Fourth Street

	
 

	
Brainerd,
  Minnesota 56401

          I
hereby exercise my Option dated ___________ (the “Option”) to purchase _______ shares of Nature Vision, Inc.’s
(the “Company”) Common Stock at the Option purchase price of $________ per
share (the “Shares”). Payment for
the Shares is enclosed, in the form permitted by the Option or the Company.  

	
 

	
 

	
 

	
 

	
 

	
 

	
I request
  that the Shares be issued to me as follows:

	
 

	
 

	
 

	
 

	

	
 

	
 

	
(name in
  which the Shares should be issued)

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
(Social
  Security Number)

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
(Street and
  Number)

	
 

	
 

	
 

	
 

	
 

	

	
 

	
 

	
(City)

	
(State)

	
(Zip Code)

	
 

	
 

	
 

	
 

	
 

	
 

	
_____

	
 

	
I intend to
  hold the Shares at least one year. (If I do sell within one year of exercise,
  I will give the Administrator a copy of the broker’s confirmation of the sale
  as soon as I receive it.)

	
 

	
 

	
 

	
_____

	
 

	
I intend to
  sell the stock within one year of exercise, and will give the Administrator a
  copy of the broker’s confirmation of the sale as soon as I receive it.

	
 

	
Dated:___________________,
  ___________.

	
 

	
 

	
 

	
Signature:

	
 

	

4Exhibit 10.5 to Pace Health Management Systems, Inc. Form 10-KSB  for fiscal year ended 12-31-2005

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

STOCK PURCHASE WARRANT

To Purchase Common Stock of

PACE HEALTH MANAGEMENT SYSTEMS, INC.

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.

Void after 5:00 p.m. Central Standard Time, on October 24, 2010.

Warrant to Purchase _________ Shares of Common Stock.

WARRANT TO PURCHASE COMMON STOCK

OF

PACE HEALTH MANAGEMENT SYSTEMS, INC.

This is to Certify That, FOR VALUE RECEIVED, ________________________ (“Holder”) is entitled to purchase, subject to the provisions of this Warrant, from PACE HEALTH MANAGEMENT SYSTEMS, INC., an Iowa corporation (“Company”), ___________ fully paid, validly issued and nonassessable shares of Common Stock, no par value per share, of the Company (“Common Stock”) at a price of $0.50 per share at any time or from time to time during the period from the date hereof to 5:00 p.m. Central Standard Time, on October 24, 2010. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The exercise price and the number of shares issuable upon exercise of the Warrants will be proportionately adjusted for stock splits, stock
dividends, recapitalizations and similar transactions. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as “Warrant Shares” and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the “Exercise Price”.

	
             
 	
            (a)
 	
            EXERCISE OF WARRANT.
 

	
             
 	
            (1)
 	
            
This  Warrant may be  exercised  in whole or in part at any time or from time to
time on or after the date hereof and until 5:00 p.m.  Central  Standard  Time on
October 24, 2010; provided,  however,  that if either such day is a day on which
banking  institutions in the State of Iowa are authorized by law to close,  then
on the next  succeeding  day which shall not be such a day.  This Warrant may be
exercised by presentation  and surrender  hereof to the Company at its principal
office,  or at the office of its stock  transfer agent if any, with the Purchase
Form annexed  hereto duly  executed and  accompanied  by payment of the Exercise
Price for the number of Warrant Shares specified in such form.
 

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

 As soon as practicable after
each such exercise of the warrants, but not later than seven (7) days from the
date of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificate for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee. 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 rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, 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 transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be physically delivered to the
Holder.

	
             
 	
            (2)
 	
            In lieu of delivering the Exercise Price in cash or check the Holder may elect to receive shares equal to the value of the Warrant or portion thereof being exercised (“Net Issue Exercise”). If the Holder wishes to elect the Net Issue Exercise, the Holder shall notify the Company of its election in writing at the time it delivers to the Company the Purchase Form. In the event the Holder shall elect Net Issue Exercise, the Holder shall receive the number of shares of Common Stock equal to the product of (a) the number of shares of Common Stock purchasable under the Warrant, or portion thereof being exercised, and (b) the current market value, as defined in paragraph (c), of one share of Common Stock minus the Exercise Price, divided by (c) the current market value, as defined below, of one share of Common Stock.
 

	
             
 	
            (b)
 	
            RESERVATION OF SHARES. The Company shall at all times 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 and delivery upon exercise of the Warrants.
 

	
             
 	
            (c)
 	
            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 a share, determined as follows: 
 

	
             
 	
            (1)
 	
            If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the NASDAQ system, the current market value shall be the last reported sale price of the Common Stock on such exchange or system on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or system; or
 

-2-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (2)
 	
            If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or
 

	
             
 	
            (3)
 	
            If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than the book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company.
 

	
             
 	
            (d)
 	
            EXCHANGE, TRANSFER, 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 or at the office of its stock transfer agent, if any, 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. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled.
This Warrant may be divided or combined with other warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term “Warrant” as used herein includes any Warrants 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, 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. 
 

	
             
 	
            (e)
 	
            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. 
 

-3-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (f)
 	
            ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: 
 

	
             
 	
            (1)
 	
            In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that the Exercise Price shall be proportionately increased (as in the case of (iii), above) or decreased (as in the case of (i) or (ii), above). Such adjustment shall be made successively whenever any event listed above shall occur.
 

	
             
 	
            (2)
 	
            In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the “Subscription Price”) (or having a conversion price per share) less than the Exercise Price on such record date, the Exercise Price shall be adjusted so that the same shall equal such lower price. Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered (or securities convertible into Common Stock are not delivered) after the expiration of
such rights or warrants, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered.
 

	
             
 	
            (3)
 	
            In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (1) above) or subscription rights or warrants (excluding those referred to in Subsection (2) above), the Company shall reserve and the holder of this warrant shall thereafter, upon exercise hereof, be entitled to receive with respect to each share of Common Stock purchased hereunder, without any change in, or payment in addition to Exercise Price, the amount of any property or other securities which would have been distributed to such holder had such holder been a holder of one share of Common Stock on the record date of such distribution (or, if no record date was established by the Company, the date such
distribution was paid).
 

-4-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (4)
 	
            
In case the Company shall issue shares of its Common Stock excluding shares
issued (i) in any of the transactions described in Subsection (1) above, (ii)
upon exercise of options granted to the Company’s employees under a plan
adopted by the Company’s Board of Directors and approved by its
shareholders, if such shares would otherwise be included in this Subsection (4),
(iii) upon exercise of this Warrant and (iv) to shareholders of any corporation
which merges into the Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such merger, or issued in a
bona fide public offering pursuant to a firm commitment underwriting, but only
if no adjustment is required pursuant to any other specific subsection of this
Section (f) (without regard to Subsection (8) below) with respect to the
transaction giving rise to such rights for a consideration per share (the
“Offering Price”) less than the Exercise Price, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal such Offering
Price. Such adjustment shall be made successively whenever such an issuance is
made.
 

	
             
 	
            (5)
 	
            In case the Company shall issue any securities convertible into or exchangeable for its Common Stock, excluding securities issued in transactions described in Subsections (2) and (3) above, for a consideration per share of Common Stock (the “Conversion Price”) initially deliverable upon conversion or exchange of such securities, determined as provided in Subsection (7) below, less than the Exercise Price, the Exercise Price shall be adjusted immediately thereafter so that it shall equal such Conversion Price. Such adjustment shall be made successively whenever such an issuance is made.
 

	
             
 	
            (6)
 	
            Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted.
 

	
             
 	
            (7)
 	
            For purposes of any computation respecting consideration received pursuant to Subsections (4) and (5) above, the following shall apply:
 

	
             
 	
            (A)
 	
            in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith;
 

-5-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (B)
 	
            in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and
 

	
             
 	
            (C)
 	
            in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefore shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof, the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (7).
 

	
             
 	
            (8)
 	
            No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents ($0.05) in such price; provided, however, that any adjustments which by reason of this Subsection (8) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section (f) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section (f) to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section (f), as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in
shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal income tax liability to the holders of Common Stock or securities convertible into Common Stock (including Warrants).
 

	
             
 	
            (9)
 	
            Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly but no later than 20 days after any request for such an adjustment by the Holder, cause a notice setting forth the adjusted Exercise Price and adjusted number of Shares issuable upon exercise of each Warrant, and, if requested, information describing the transactions giving rise to such adjustments, to be mailed to the Holder at his last address appearing in the Warrant Register, and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section (f), and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
 

-6-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (10)
 	
            
In the event that at any time, as a result of an adjustment made pursuant to
Subsection (1) above, the Holder of this Warrant thereafter shall become
entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Warrant shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (1) to (8), inclusive above.

	
             
 	
            (11)
 	
            Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement.
 

	
             
 	
            (g)
 	
            OFFICER’S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer’s certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer’s certificate shall be made available at all reasonable times for inspection by the Holder or any holder of a Warrant executed and
delivered pursuant to Section (a) and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. 
 

	
             
 	
            (h)
 	
            NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least
fifteen days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. 
 

-7-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (i)
 	
            
RECLASSIFICATION, REORGANIZATION OR MERGER. In case of
any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, 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, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and amount of
shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Common Stock
which might have been purchased upon exercise of this Warrant immediately prior
to such reclassification, 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. The foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances. In
the event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof. 
 

	
             
 	
            (j)
 	
            REGISTRATION UNDER THE SECURITIES ACT OF 1933. Until the expiry date of this Warrant, the Holder of this Warrant shall have unlimited right to piggy back registration of the Warrant Shares. The Company’s agreements with respect to Warrants or Warrant Shares in such registration shall continue in effect regardless of the exercise and surrender of this Warrant.
 

	
             
 	
            (k)
 	
            RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall include a legend in substantially the following form:  THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
 

-8-

Exhibit 10.5

Form of October 2005 Stock Purchase Warrant

 

	
             
 	
            (l)
 	
            
The Company will not, by amendment of its charter or through reorganization,
consolidation, merger, dissolution, sale of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Holder of this Warrant against
impairment.
 

Dated: October 25, 2005

PACE HEALTH MANAGEMENT SYSTEMS, INC.

 

	
             
 	
            By:
 	
	
             
 	
            Name:  
 	
	
             
 	
           Title:  	Director
			

-9-

PURCHASE FORM

Dated _____________ 20__

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 __________________________________________________
 

________________

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.

Date ______________, 20__

Signature __________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}]]